You can store incredible wealth in the mysterious digital realm that is Bitcoin. It’s an amazing power. But. With great power comes great responsibility and the single most important responsibility you have is how to protect your Bitcoin private keys. This comes in 3 forms:
- “Protect” as in should you hold your own private keys or let someone else do it?
- “Protect” as in which Bitcoin Wallet should you use? Software, hardware etc
- “Protect” as in which Seed Phrase backup system should you use?
We’ll be covering all three parts and more as they’re all crucially important aspects to Bitcoin Private Key protection and all affect each other.
Understanding Private Keys
Last week we covered Bitcoin private keys vs public keys in What Are Public And Private Keys? We also covered how to get a private key for Bitcoin but if you haven’t read it yet please do so, as you can’t protect what you don’t understand. It should only take you around 6 minutes or so then you can continue on with this piece. For those too lazy to click a link though…
Public and private keys are what makes up Public-Key Cryptography. In general private keys are used to encrypt data then on the other end the corresponding public key is used to decrypt it. Public and private key cryptography has been around for much longer than Bitcoin and is used in many applications and networks such as the End-to-End (E2E) encryption you see used in messaging applications like Signal.
When it comes to Bitcoin, the private key is used to prove unique ownership of your bitcoins. It’s what’s used to create the signature which authorises the spending of the funds and as such, should be kept secret at all times. While anyone can view bitcoin funds, only those with the unique private key can spend them.
Without the private keys you don’t actually have control over anything. This is why the saying “not your keys, not your coins” came about. Allowing someone else to custody or hold the private keys to your funds (like centralised exchanges that go bankrupt do) means you own zero bitcoins.
It’s incredibly important that you never share your private keys with anyone, ever!
Understanding what and how important your private keys are should now hopefully make it crystal clear that when it comes to the first “Protection” form, the answer is that you should always hold your own private keys and never let anyone else do it.
