The key to the heart of every Hodler Private Key. But what a Private Key is exactly? And how does it work in Bitcoin and bitcoin-like networks?
In the 1970s, developed a mathematician, a new Form of cryptography. The name of this invention is received by the asymmetry of the key pair used to encrypt and Decrypt information. While in symmetric cryptography, only one key to encrypt and Decrypt is used, there were now a Couple.
The advantage of this cryptography is that the encryption is much safer. If Alice and Bob want to communicate using symmetric cryptography with each other, both have the same password or the same key. Alice writes her message, encrypted with the password and sends it to Bob. Bob decrypts the message with the same password, reads, responds, and re-encrypted with the password. This communication is only as long as only Alice and Bob know the password. If Eve learns the password, you can read the entire communication. In addition, the question of how Alice and Bob would like to share the password with, without that Eve learns it also.
With asymmetric cryptography, the Situation is as follows: Alice has two keys, a Public Key and a Private Key. The Public Key is intended, as the Name implies, for the Public. He is there to encrypt information specific to Alice. The Private Key is only for Alice. It is the only key that can decrypt a Public Key encrypted message. Alice can encrypt her message to Bob using a Public key. Alone, Bob can decrypt with his Private Key this message. Because of these two different keys, one refers to this field as asymmetric cryptography or Public-Key cryptography.
Digital signatures in Bitcoin and other crypto-currencies
In Bitcoin and other similar crypto Public-Key cryptography is used currencies for the signatures of transactions.
The Public Key is used as a receiving address. Anyone can send to this address, transactions, and messages with this Public Key to encrypt. However, only the receiver can produce, the owner of the corresponding Private key, a digital signature, which is recognised by the other as valid.
Private Key Management
By now it should be clear: Who controls a Private Key can spend the placed on the corresponding Public Key stored crypto-currency. For this reason, the secrecy of the Private Keys is essential for every user. The Private Keys in the Wallet are stored. This stores and manages the Private Keys and signed with them transactions, if the user makes a Transfer.
So what does it mean to own Bitcoin? It is, to have the sole access to a Public Key-Private Key Pair. In this sense, one can be his own Bank, because no third party can move the money or freeze. The Private Keys are lost, even the legitimate owner no longer has control over his money. In Bitcoin and similar projects, there is no “forgot password?”. Here, everyone is responsible for their own safety.
Hierarchical-deterministic Wallets, and the Seed Phrase
In most cases, you do not only uses a Pair of Public and Private Key, but a great many. However, these key pairs from a Master key or Seed to generate.
The Master (extended) Key is a very large value (512-bits). Every HD Wallet has a Master Key, which must strictly be kept secret. He can also as a Seed Phrase are shown. That is to be imaged, the Master Key can result in a word – usually 12 or 24 words. These words make the use easier for people than a meaningless string of characters.
In addition, you have to create only a Backup for a Wallet, by recording the Seed Phrase. With the Seed Phrase all the derived Public Key-Private Key pairs can be restored. Ultimately, a piece of paper that if the Bitcoin & co. for safe-keeping. Such a piece of paper called a Paper Wallet.
An example of a Seed Phrase:
melt unusual enhance amount harsh nose cattle hint approve drift tell friend
Safety and convenience
As so often in the Bitcoin world, there are also in terms of Private Keys Trade Offs. At one Extreme you can be so comfortable, and the Private Keys not to self-manage. At the other Extreme, one can generate its Wallet with a Computer that has never touched the Internet, and transactions in “cold” sign (i.e., with a Computer that is not connected to the Internet).
For most users, a middle ground between these Extremes is optimal. In principle, however, is that you always have self-exclusive access to the Private Keys, because who does not have his Private Keys itself, has, strictly speaking, no Bitcoin (or similar crypto currency).
That is, a Seed is essential. The Paper Wallet can be, for example, in water – and fire-tight containers store. Or the Seed can be copied to several papers, which are then hidden in different places. Or, you stored it in a Bank vault. The creativity are no limits when it comes to the safe storage of the Paper Wallet. However, you can make a Paper Wallet with no transactions, you need a Wallet App, where you can enter the Seed.
With a Hardware Wallet, it’s easy, its Private Keys to be stored safely and still be able to transactions are relatively easy to make. A Hardware Wallet is a special piece of Hardware, and is connected via USB to the Computer. The Hardware Wallet is home to the Private Keys and this never to the connected Computer. To make a transaction, signed by the Hardware Wallet itself and with only the already-signed transaction to the Computer. So even a virus could not access infected computer to the Private Keys.
The Hardware Wallet offers the best Trade Off of safety and accessibility.
Many Hardware Wallets support the popular crypto-currencies such as Bitcoin, Ethereum, Litecoin, and so on. Hardware Wallets are on offer so as a universal vault for crypto-currencies. What crypto currencies are supported by the Hardware Wallet, you can find out the manufacturer.
When you Create a Wallet on such external Hardware to generate a Seed Phrase. One should lose his Hardware Wallet so you can restore yourself then using the Seed-Phrase, all on the original device stored stocks.
Conclusion: Public Key and Private Key
The key pairs Public and Private Key serve Bitcoin as receiving addresses and to Create digital signatures. The participants in crypto-currencies can and send.
The Manage of the Private key takes on a Wallet. There are also Hardware Wallets, which represent the most secure Form of Wallets.
For user friendliness, there are hierarchical-deterministic Wallets (in short: HD Wallets) that have a Master key or Seed, and all the Public and Private Keys can be derived. The most important lesson in dealing with crypto-currencies is, therefore, his Seed Phrase, in a safe place. With the Seed Phrase you can recover the entire Wallet with all of the Private Keys. This means that even if you lose the Hardware Wallet, the Laptop, or the phone, it has leash with the Seed Phrase for a security.