Managing cryptocurrencies and ensuring that they always stay safe is a fairly straightforward task (once you get the know the basics, at least). However, since owning cryptocurrencies means being your own bank and taking complete control over your funds brings with it an inevitability which might potentially be scary for some investors.
Unlike when dealing with fiat, managing, trading, and storing cryptocurrencies requires a bit of commitment and care since all transactions in the crypto world are irreversible. Not only this but losing one’s private keys or seed keys will result in the permanent loss of your funds.
If you’re starting out in the crypto world, there’s a good chance you’ll find this guide very informative as we provide detailed explanations regarding what private keys are, their importance and, ultimately, how to store them to ensure that your funds stay as securely as possible.
This way, you won’t be just a statistic, as it’s estimated that around 4 million Bitcoins are already lost beyond recovery because of missing private keys. However, before we get to the actual tips and tricks, it’s important to understand exactly what private addresses or private keys (or private seeds) and public addresses are.
What is a private key?
A private key can be simply defined as a secret alphanumeric password used to send your cryptocurrencies to another crypto address. Private keys have a high degree of randomness and uniqueness based on the cryptographic functions. It’s a 256-bit long random number that should be in your possession as soon as you make the wallet.
The main role of private keys is to guarantee irreversible transactions. This is guaranteed with the help of mathematical signatures which are linked to each transaction. These signatures are also unique, as they are generated from the same private keys.
When you set up a crypto wallet, you’ll be asked to note down a recovery seed, also called seed key, recovery key, seed phrase. This recovery seed is extremely important since it represents the only way to recover your funds in case you lose your private wallet or mobile phone (with any wallet app on it).
The most important thing to remember about the private key is as follows: if you don’t own your private key or you’ve forgotten or lost it, then you don’t own your crypto funds – it’s as simple as that.
What is a public key?
Just like the private key, the public key is also an alphanumeric address. It’s derived from the private key by using cryptographic math functions. In short, it’s the address used to receive cryptocurrencies. As its name suggests, this address is always seen and broadcasted for receiving funds. You can make as many public addresses as you want.
How to keep your private keys or seed keys safe?
Use a hardware wallet
When it comes to security solutions for your crypto funds, they don’t much better than hardware wallets. These wallets are not online and have built-in security features meant to keep your cryptocurrencies extremely safe in almost all conditions. Owning a hardware wallet (especially for large sums of crypto) is probably the most important step you can make towards keeping your funds safe. These wallets can generate both private and public keys using mnemonic phrases or seed words when launched.
One of the most straightforward ways to securely store your private keys is to simply memorize them. Typically, it’s better that you memorize the recovery phrase in order to be able to recover your funds at any time. You could also do some research about a so-called mnemonic pegging technique and create a “brain wallet”. Evidently, this isn’t the most reliable long-term option, but if you know that you have a good memory, it might be one of the safest.
Use a paper wallet
Paper proved itself as one of the most efficient materials for storing data on. Sure, the paper is not exactly the most resistant medium for storing data out there, but if stored correctly, it can last for over thousands of years. The best thing is, a paper wallet is free.
Create more copies
This might seem a bit counterproductive, but if done right, there’s a good chance that your funds will always be safe. Try to create more than one copy of your seed keys or private key and keep them all in different, but hidden, places.
Use your will as the ultimate storage
Even though most of us treat life like a certainty, there’s really no way of knowing what could happen tomorrow. If the unexpected is to come, at least there’s still a way to pass on your funds to your loved ones. Another method implies leaving instructions in your will regarding both the private and recovery key.
Engrave your private keys
As mentioned before, the paper is a reliable medium for storing private keys, but only if the proper storage conditions are met. In the case of a natural disaster, for example, a piece of paper can become worthless in mere seconds. Some crypto experts recommend engraving the private keys or see phrases on stainless steel, offering a bit more reliability.
Use an encrypted storage device
Another very good idea is to use an encrypted storage device to store your private keys and recovery phrases. You can use an HDD or a basic flash drive and encrypt your private keys on it.
Other useful tips
Don’t ever take a screenshot or a mobile photo of your recovery phrase. As you can imagine, this is a bad idea since all devices can be hacked quite easily, despite most security features implemented by major companies.
Another good tip is to never store your recovery phrase or private keys in the cloud or on your email account. In short, avoid keeping your private keys online at all costs.
As mentioned before, hardware wallets have a lot of advantages. However, they are not what you would call versatile. Hence, if you’re using your crypto regularly, you might want to consider transferring a small part of what you own to a mobile or desktop wallet.
Sadly, it’s important to note that you can never ensure 100% security for your funds. However, with a bit of luck, goodwill, and care, you can keep them very secure. By following the tips above, you should be able to ensure a maximum security level for your crypto funds.