17 Jun What is a Bitcoin’s Wallet Private Key: What if you lose it?
If you have dabbled into the world of Bitcoin, you are probably acquainted with the concept of crypto wallets. It’s a significant aspect to crypto-mining as it lets you handle the rewards you make through mining.
A crypto wallet allows you to send, receive, view and spend cryptocurrency. It is where you store your private and public key, providing access to the cryptocurrency you own.
Even though they all share the feature of securing your cryptocurrency, there are various types of crypto wallets;
- Hosted crypto wallets
A platform hosts or looks after your private key for you.
- Non-custodial wallets
You are in-charge of your private key without hosting from any third party platform
- Hardware wallets
Your key is stored offline and you are responsible for keeping it secure.
A private key consists of a secure code which allows the holder to prove ownership and make cryptocurrency transactions. Bitcoin private keys feature a 256-bit string as a combination of numbers and letters. This is stored within your crypto wallet and allows you to access your Bitcoin whenever you want.
Risk of Loss/Theft
It’s extremely important to keep your private key secure. In case, where a third-party has access to your private key, they will effectively gain complete access to your crypto wallet. Similarly if you lose your private key or are unable to access it for any reason, your holdings will be at risk.
The risks of losing your private key are greatly emphasised and should be taken into account before stepping into the world of cryptocurrency. The development to secure the private keys is still ongoing. In some countries their safekeeping is a thoroughly managed financial service.
On the contrary to the private key, the public key is designed to be shared with other people or platforms to make transactions. It’s linked to the user’s private key and is issued as a pair when a wallet is created; much like a bank account number and PIN Code.
A Bitcoin Address is a 26-35 characters long unique string of numbers and letters generated by the user’s crypto wallet. It is used to receive payments and make transactions. To be on the secure end, it is recommended that the Bitcoin address be generated afresh for each transaction.
Is the Bitcoin address and Bitcoin private key the same thing?
You should never share your Bitcoin private key for any reason. However, you can share your Bitcoin address with anyone who has to send you Bitcoin.
Keep your Private key safe
As we emphasised earlier, keeping your private key safe is the most vital part of making sure no one has access to your Bitcoin. For transactions, you only need to share your public key or Bitcoin address. It is recommended that you keep your private key in a hardware wallet instead of an online wallet. It is secure to keep the private key offline as there are no risks of hacking. Hardware wallets give you complete access to your Bitcoin and reduces security alerts as you will not entrust a third-party platform.
It’s always smart and quite an essential call to back up your private key in case you lose it. This makes the recovery process simpler. The types of backup available to you depends on the crypto wallet you’re using. Some of the most commonly used back-ups are;
- A seed phrase
A phrase consisting of 9-24 words of your choice.
- A wallet back-up
- Making a copy of the private key and placing it somewhere safe
What if I lose my Bitcoin private key?
It’s incredibly inconvenient if you lose your hardware wallet or private key. However, this shouldn’t be fatal provided you have backed up your private key. In a case, when you have not, as of now, it is impossible to recover your Bitcoin private key. Any platform or person claiming otherwise is fraudulent.
There are a few things you should know before beginning the recovery phase of your wallet.
The Seed Phrase & Recovery Key
If you have made a choice of a noncustodial wallet, you probably have invested your time in making a backup. Any device you’re using – may it be a desktop, smartphone or a hardware wallet, the process is similar. Look for the seed phrase you have stashed away for this very day and enter it in your replacement wallet. Without any complications, you will see your balance restored and coins reappearing.
The exception to this rule applies if your wallet doesn’t rely on a seed phrase for recovery. Many wallets generate their own recovery key during setup. You can regain access to your wallet using the recovery key provided to you.
Sweeping vs Importing
If you lose your phone or hardware wallet, a third-party can access your private key. You would want to safekeep and transfer your Bitcoins to a new wallet at your earliest.
Importing your private key into a new wallet is usually done by entering the seed phrase. However, importing doesn’t wipe off coins from previously used devices, hardwares or wallets. Your Bitcoins will remain at risk of being drained when discovered by the third-party.
In order to prevent this, you must sweep your private key into the public address assigned to your new wallet. This empties out the balance of the old wallet and sends Bitcoins to the newly created public-private key pair.
Most non-custodial wallets enable you to sweep and transfer funds into new wallets.
The more precautions you take in safekeeping and making backups for your Bitcoin Private key, the better. Lost Bitcoin increases the value of the remaining Bitcoin on the network. Its value is derived from its finite supply – your loss is contributing to its worth.