Private Key

The private key is a component of asymmetric encryption in cryptography, which uses a pair of keys: a private key and a public key. It is used to decrypt data that has been encrypted with the corresponding public key and to sign transactions, providing proof of ownership and authority.

Also known as a secret key, it is a vital component in public key cryptography. In symmetric cryptography, a single key (referred to as a secret key) is used for both encryption and decryption. In asymmetric cryptography, the private key is kept secret, while the public key is openly shared. The private key's role is crucial for decryption and for digitally signing transactions to ensure their authenticity and integrity.

A private key in the context of cryptocurrency is a secret code that allows users to access and manage the funds held in their crypto wallet. It is a long string of alphanumeric characters, which is a large random integer. These are generated using pseudorandom number generators (PRNGs), which use computational power and sources of randomness, such as thermal noise in electrical circuits, to create these random integers.

It is typically a 256-bit number, which means it can be represented as a string of 64 hexadecimal characters. The range of possible values for a private key is between 1 and 2²⁵⁶ - 1, resulting in a vast number of possible keys, making it extremely unlikely for two private keys to be the same.

It is kept secret and is used to sign transactions, providing proof of ownership and authorization. The corresponding public key is derived from the private key and is shared openly, allowing others to verify the signature.

In symmetric cryptography, a single key is used for both encryption and decryption, but this is not the same as the private key used in asymmetric cryptography. In symmetric encryption, the key must be kept secret between the parties involved.

When creating a cryptocurrency wallet, the private key is generated and securely stored. Wallet holders must keep their private keys secure, as anyone with access to the private key can control the associated funds. Some wallet solutions provide the option to store the private key as a QR code, which can be scanned for ease of use.

Private key encryption, also known as symmetric cryptography, involves the use of a single key for both encryption and decryption. There are different algorithms used in symmetric cryptography, which can be categorized into two main types:

#1 - Block Cipher

Block cipher algorithms encrypt data in fixed-size blocks (e.g., 64, 128, or 256 bits) of plaintext, transforming them into blocks of ciphertext of the same length. This method involves dividing the plaintext into blocks and processing each block individually. While block ciphers are secure and widely used, they can be slower than stream ciphers due to the overhead of processing data in blocks. Examples of block cipher algorithms include AES (Advanced Encryption Standard) and DES (Data Encryption Standard).

#2 - Stream Cipher

Stream cipher algorithms encrypt data one bit or byte at a time, producing a continuous stream of ciphertext. This method processes the plaintext in small units, typically one byte at a time, making it generally faster and more suitable for applications where speed is crucial. Stream ciphers are often used in real-time communication systems. Examples of stream cipher algorithms include RC4 and the Salsa20 family.

In symmetric cryptography, the key lengths can vary depending on the algorithm used. Standard key lengths include 64 bits, 128 bits, and 256 bits, with longer keys providing higher security.

Let us look at some real-world and hypothetical examples to comprehend it better.

Example #1

Suppose James is a crypto user who holds a significant amount of Bitcoin in his wallet. However, he wishes to acquire more coins on a different blockchain, so he signs up for a new wallet on the Ethereum network. Upon creating the new wallet, James receives a private key, which is crucial for managing and transferring funds. When James wants to send 60 ETH to Serah, he uses his private key to sign the transaction, which verifies that he is the owner of the funds and authorizes the transfer. The signed transaction is then broadcast to the Ethereum network for validation and inclusion in the blockchain.

For security reasons, James never shares his private key with anyone, including Serah. Instead, he sends the signed transaction to the network, and once the transaction is confirmed, Serah's Ethereum address receives the 60 ETH. In this example, James's private key was used to sign (authorize) the transaction, ensuring its validity. The Ethereum network verifies the signature to confirm the transaction. Serah does not need to input any key to receive the funds; she only needs her public Ethereum address to accept the ETH.

Example #2

According to the news article from DailyCoin, as of February 2023, the crypto wallet provider Edge Wallet experienced a security breach that resulted in the theft of 2,000 private keys from their system. Some users reported unauthorized transactions, specifically the theft of Bitcoins from their wallets. Edge Wallet quickly addressed the issue by securing the system against the vulnerabilities and urging users to update to the latest version of the app.

Private keys serve many benefits during encryption; however, they have some disadvantages, too. Let us compare them: