FUNDAMENTALS OF CRYPTO
Private Keys
At the core of cryptocurrency lies one simple truth:
Control over your private keys = control over your money.
What are Private Keys?
A private key is a long cryptographic string that acts as the master password to your crypto. Essentially your entire portfolio resides behind a wall that is safeguarded by a private key string that only you (the account owner) should know. As a private key holder, you have the ability to control every movement of your capital at the click of a button; authority to move an asset from wallet A to wallet B, authority to deposit/withdraw into 3rd party applications, & signature authorisation for transactions.
How Private Keys Work
To receive your unique private key, you must first create a new wallet either through a warm wallet application or a cold storage wallet. Your new wallet then generates a unique private key string, usually 50 characters long, as well as a seed phrase made up of 12–24 words that serves as a human-readable backup of that private key. These words when prompted are written in exact order of when first received, and act as your backup security measure if you were to misplace your private key. These seed phrase words are automatically generated at wallet creation, and cannot be custom created.
If someone else gains access to your private key or seed phrase, they gain access to control your funds.
It’s important to clarify that there is a difference between a ‘Private Key’ and a ‘Public Key’. Whilst all wallets have both a private key & a public key, like the name suggests; one is used as a private cryptographic string that acts as the master password to your crypto, the other being used as a cryptographic address used to receive crypto. A public key is safe to share with those who intend to send you cryptocurrency. Think of a public key just like an email address, or bank account number; you give this information out to receive correspondence or financial compensation, however you wouldn’t give out your password to either one of these accounts.
Why Private Keys Are Important
Your private key provides ultimate control of your crypto:
✅ If stored safely, it guarantees full ownership.
🔒 If lost, access to your crypto is permanently gone.
❌ If stolen, your crypto can be instantly withdrawn, with no recovery options.
This is why the saying in crypto: “Not your keys, not your crypto.” is so important.
How to Store Private Keys Safely
There are three typical ways that an investor can store their private keys. For most people the first two methods will be more than sufficient to ensure maximum asset safety:
Cold (Hardware) Wallets: Uses a dedicated 2FA device to store private keys offline, & isolated from the internet. Examples: Ledger, Trezor, Tangem. Learn which Hardware wallet is right for you here.
Paper Wallets: Hand written copy of your private key. Highly recommended to be kept in a safe, waterproof, and fireproof location.
Encrypted Digital Storage: Only for advanced users, using strong encryption and offline devices to store private keys.
What Happens If You Lose Your Private Key
Losing a private key is like losing the pin code to your personal bank vault; there’s no central authority that can restore access. If you lose your private key, the crypto is effectively gone forever. That’s why it’s always recommended to keep a back up of your private key or seed phrase in multiple secure locations.
Common Mistakes to Avoid
- Storing keys on a cloud drive or email (hacking risk).
- Sharing keys with anyone, even “trusted” contacts.
- Failing to back up private keys or seed phrases.
Now that you know what a Private Key is, it’s time to move on to our next lesson topic, “What is a Seed Phrase”.
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