Bitcoin: Why are private keys so important?

With Bitcoin, everyone is their own bank. This means that everyone is responsible for their own private keys. If lost, there is a risk of total loss.

One of the cornerstones of the Bitcoin network and the crypto movement is decentralization. This means that there is no central institution, person or other entity controlling the network. We are dealing with a peer-to-peer network, so all participants are directly connected to each other.

Public keys en private key in het Bitcoin network

If I want to send Bitcoin or Satoshis to a friend, all I need is her Bitcoin address, aka a public key called. This is something like the IBAN in the banking system, but without a bank. The public keys can be shared with others without risking access to Bitcoin.

The situation is different at private keys. The name says it all - they must remain private. Because with them, you can access your Bitcoin anytime, anywhere in the world. Even if your computer explodes or all the ATMs in the world go down at once: If you have access to the Internet and have your private keys handy, you can freely dispose of your Bitcoin.

On the other hand, if you lose them, forget them or if they fall into the wrong hands, you risk total loss. Because in the Bitcoin network, there is no "Forgot your password? After all, there is no central authority you can turn to.

Private keys belong in a wallet

No later than this point, you may have guessed that private keys must be kept secure. For this you use digital wallets. A distinction is made between hot wallets and cold wallets. With the former, you have quick access to your keys or crypto because they are connected to the Internet. However, they are considered less secure.

Cold wallets, on the other hand, are the more secure variety. Here you store your private keys on a kind of USB stick that is protected from unauthorized access by multi-level security procedures.