Various instances enforcing us to hold on to our private keys safely
The private key and public key are the two main set of string characters which are used to identify addresses and access them respectively. A public key is nothing but an address given to our cryptocurrency wallet which the other users can use to send cryptocurrencies. It can be related to a bank account number which can be revealed to everybody for the transfer of money. A private key, on the other hand, is like the password and must be kept secret. A private key is like a security code without which one cannot have access to their own cryptocurrency funds. In banking terms, this can be referred to as the ATM PIN number which one keeps as a closely guarded secret.
There are a number of ways one can apply in order to safeguard their private keys. A number of companies offer online as well as offline wallets. In Layman’s terms, a wallet is nothing but a place to store our public and private keys. The online wallet services include web wallet, cloud wallets, etc. Offline wallet services include hardware wallets, paper wallets, etc. Among these to the hardware wallets are the most preferred one because they impart the highest level of security due to its cold storage and offline nature.
There is a number of potential reasons why one must keep their private keys with themselves:
A number of cryptocurrency exchanges glorify themselves to be on the most trustable one and even convince their customers. But that have been instances where the cryptocurrency exchange itself took control of all the private keys and flew away with the trading funds.
There are incidents where hot wallet reserves, the online e-storage point for private and public keys, was attacked by a malicious group of hackers and a many private keys were stolen. Which led to a loss of huge amounts of cryptocurrency.
There also chances where the centralized cloud storage services may tempt to sneak into your personal data stored on the servers. After all, when one can have easy access to someones private key, without them knowing this, then there is effectively no way one can claim thefts. Storing your private keys on cloud storage services like Dropbox or Google Drive is not preferred.
In general, storage of the private keys online is highly vulnerable due to the fact that hackers have relatively higher chances to decode the systems encryption security when it is connected to the internet. If the system itself is not connected to the internet, it further enhances security
One must choose a complex private key. Since it is well known that a private key is the one which gives rise to a public address. Choosing a complex private key will disable the hackers or will decrease the chances of hacking. Imagine if one chooses a simple private key as “12345”. This private key would generate a public address. The hackers can track the address generated by this private key on the whole Blockchain Network and whenever they find an incoming transaction from this public address. They interfere in the transaction and by using the private key, might change the receiver of the transaction and transfer them into some other public address of their choice. Hence choosing a complex private key is very crucial.
Sometimes the wallet service provided by the companies might become careless enough to lose the private keys out of carelessness. According to some reports, almost 20% of the total number of Bitcoins have already been lost forever due to the improper precautions. Even the hardware wallets which one uses to store Bitcoins must be carefully preserved and regularly double-checked. The loss of the hardware wallet is can be one of the worst nightmares.
Hot wallets are generally used in order to provide fluidity in transactions. However one must make sure that hefty amounts of Bitcoins aren’t stored in the hot wallets apart from the required amount. The offline wallet is generally used by large organizations in the form of computers or pen drive like devices in order to store massive amounts of cryptocurrencies.