In the crypto world, there are two types of keys: Private and Public. A public key is an address everyone can see and use for sending crypto assets to each other. A private key is like a password used to provide access to your owned crypto assets.
What is a private key?
A private key is a large, randomly-generated number with hundreds of digits and letters, which lets you access owned crypto. Each cryptocurrency has a different type of private key. Owning a cryptocurrency essentially means having a private key.
Most importantly, it is possible to recover a public key without much trouble by using a private key. However, it is impossible to recover a private key if you lost or forgot it. To not lose your crypto assets, keep your private key a secret and don’t share it with anyone.
Why is it important to secure a private key?
Most cryptocurrencies are decentralized, so no bank or any other institution in the middle holds your digital money. Your crypto assets are distributed across a network of computers via blockchain technology. So losing a PIN isn’t a disaster because a bank can provide a new one, but losing a private key means you won’t be able to access your cryptocurrencies forever.
Mistakes that cost a lot of money
Many cryptocurrencies are lost because of simple mistakes. Here are some stories about how losing private keys cost a lot of money.
Stefan Thomas
In 2011, the programmer Stefan Thomas lost crypto just because he forgot the password, which would allow him to unlock a hard drive with cryptocurrency. He realized that around 10 years ago, at that time, coins were already worth around £100,000.
According to him, he felt like a complete idiot. After this incident, he suffered from depression and had trouble sleeping. Now he could be a crypto billionaire if only he could remember his password.
Davyd Arakhmia
A member of the Ukrainian parliament Davyd Arakhmia also faced some losses. He needed some free space on his hard disk with other information that he accidentally deleted a file with his private key from a hard drive with crypto assets. Because of this reckless decision, he lost around 400 Bitcoin. Now the worth would be more than 9 million US Dollars.
James Howells
Another unfortunate case of lost Bitcoin is about British computer engineer James Howells. He accidentally threw away his hard drive containing the private key into the trash. Howells had two identical hard drives: one was empty, and another contained 8,000 bitcoins. By mistake, he threw away the wrong hard drive and lost his Bitcoins, which he mined in 2009.
How to store cryptocurrency safely?
One of the solutions that could help you to protect yourself from these horrifying events and secure your cryptocurrency is crypto custody.
Simply put, crypto custodians are the third parties, that look after your crypto for you. Crypto custodians, not just secure crypto assets but also give the ability to recover the password to the account. Another advantage is that crypto custody is not hard to use for beginners.
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- Source: https://www.finextra.com/blogposting/24748/what-do-you-need-to-know-about-a-private-key-and-what-happens-if-you-lose-it?utm_medium=rssfinextra&utm_source=finextrablogs
