What are Addresses, Public Keys, and Private Keys?
Within the world of cryptography, you will often hear the terms address, public and private keys, all of which are essential in understanding the ownership and security of a token or asset held on the blockchain. The easiest way to understand the difference between public and private key is by looking at the analogy of an email address.
The public key is what its name suggests – public. It is made available to everyone via a publicly accessible repository or directory. A wallet’s public key is often referred to as its address, however, there is a small difference between the two that is worth understanding. A public key is comprised of 32 characters, and its address is hashed down to 20 characters. A wallet’s address is comparable to your email address, something you give to others so they know where to send an email to. In the same regard, you give others your wallet’s address so they can send you bitcoin, ethereum, or any other digital asset compatible with that wallet.
A private key is the password (decryption tool) associated with your wallet’s public key or address. In the analogy of an email address, it is the password that grants the owner access to the account, as well as the ability to sign and send email from it. Your private key gives you full control of your wallet’s assets, allowing you to send payments to another address for example. Only the owner of the private key is able to have control of the wallet’s assets, so it is very important to keep this very safe. If you lose it, someone else might be able to gain access to your wallet and steal your funds.
Each wallet (address) is also assigned a “seed” recovery phrase for extra security. This is usually a set of 12 – 24 random words that correspond to your unique private key. If you lose your wallets private key, you will only be able to regain access to your wallet by using your recovery “seed” phrase. This is also something you should keep very safe and not hand out to others, it is your last line of defence in the ownership of your wallet’s assets.
If you lose both your private key and your recovery “seed” phrase, you will not be able to regain access to your wallet and your funds will be lost. We cannot stress the importance of private key / seed phrase security enough.
In the context of our upcoming NowTee sale, the private keys assigned to you (for each t-shirt) at the completion of your pre-order, will later be used with the corresponding public key to create a digital signature. This allows you to prove ownership of the asset and claim the rights to where it will be shipped. Only the holder of the NowTee’s private key can successfully create a digital signature and verify ownership of it. We will do a more detailed post on how to create this signature and prove ownership closer to the time.
Please continue reading below to find out more about different wallet types and advice on key storage.
How To Store Your Private Keys
There are many different ways in which to store your wallet’s private keys, the main difference being Custodial vs Non Custodial wallets. We will discuss a few of the most popular options, addressing both their advantages and disadvantages.
*Please note that for our NowTee sale you will have to use a Metamask wallet. For more information on setting one up please read more here.
Custodial Wallets
A custodial wallet is a wallet provider that takes care of your keys for you. This a very convenient way of operating a desktop or mobile wallet as you don’t have to worry about your private key and its storage. You can also regain access to your wallet if you lose your password by contacting the 3rd party provider, much like you would if you had to reset your email’s password after losing it.
However, it is worth noting that by using a Custodial wallet you are reintegrating trust into a trust-less system. Most Custodial wallet providers hold your passwords and private keys on an online server, making them susceptible to an online hack. Even though there are some secure custodial wallets, use them with caution and take responsibility for the safety of your assets. We do not recommend storing large quantities of cryptocurrencies on Custodial wallet providers. In fact, we find it hard to recommend using a Custodial wallet at all.
Custodial wallets are usually found in the form of online exchanges. Here are a few examples:
1). Coinbase
2). Binance
3). Kraken
Many custodial wallets and exchanges we will not mention because they have previously been hacked, reinforcing our opinion that they are not the safest option for cryptocurrency storage, however convenient they may be.
Non-Custodial Wallets
A Non-Custodial wallet is a type of storage whereby you are the sole owner of your private keys. Your private keys may be stored on your hardware device (mobile or desktop), via an external hardware device, or perhaps through a recovery “seed” phrase written on a piece of paper. Your private keys are not stored on any online server by a trusted 3rd party, and are therefore much less susceptible to theft or hacking. For storing larger amounts of cryptocurrencies, we recommend using a non-custodial wallet. Some Non-Custodial wallets are safer than others due to the means by which your keys are stored.
Here are a few examples of Non-Custodial wallets:
1). Hardware Wallets
A Hardware Wallet is a specialised electronic device you plug into your computer or phone. The device is used to store your private keys, keeping them offline and therefore greatly improving the security of your private key storage. These types of wallets are further encrypted with the use of a password or pin, as well as a “seed” recovery phrase for added security in case you were to lose either of the former. Hardware wallets cost on average around $100, and usually come with their own desktop interface, or are otherwise compatible with other Web Wallet providers such as MyEtherWallet – a popular wallet provider for Ethereum holders. Hardware wallets, like the Trezor, Ledger, or KeepKey also support the storage of multiple cryptocurrencies.
2). Web (Light) Wallets
Non-Custodial Web Wallets do not keep your keys, they are stored in your browser. Web Wallets such as MyEtherWallet and Metamask simply provide a wallet interface for you to interact with, allowing you to access your account from any device, all you need to enter is your private key. Some web wallets also support the use of hardware wallets, combining a user friendly interface with the added security of an offline key storage device.
3). Mobile and Desktop Wallets
There can be installed on your smart phone or desktop and are convenient for everyday use. There are a huge number of such wallets, but you should choose them carefully, paying attention to their security and authenticity. These wallets usually give you your private key in the form of a recovery “seed” phrase, and are often paired with a password/PIN for added security.
The keys to your wallet are stored on the computer or mobile device itself, there is therefore a possibility of theft if the fraudster takes physical possession of your computer or mobile. However they would have to have your PIN or password to access the wallet. In the case of a theft, you can restore your wallet on another device through the ownership of your recovery “seed” phrase.
4). Paper Wallets
A Paper Wallet is a written or printed copy of your private key and recovery seed phrase. When accessing your wallet, you would have to either scan your private key or type it in manually in order to gain access. Your private keys are stored offline, and therefore less susceptible to online hacking. However, there are many downsides to a paper wallet, such as loss, theft, paper degradation etc. It is comparable to storing cash under your bed.
Which Should I Use?
When it comes to choosing your wallet, we recommend that you explore and experiment different options to find what feels good for you. Do your own research and make sure you are comfortable with your wallet’s level of security.
Two things you should also take into consideration when choosing a wallet are Quantity and Timeframe.
If you want to store larger amounts of cryptocurrency for a prolonged period of time, we recommend using a hardware wallet. So far they have proven themselves to be the safest form of long term storage (although not infallible). Just make sure you take care of your keys and right down your recovery “seed” phrase incase you ever lost your hardware wallet and had to restore it on another device.
However for everyday usage, mobile & desktop wallets are both convenient and (often) safe to use. Treat your mobile wallet as you would cash in your pocket, you wouldn’t want to carry around too much just incase you lost it!
Some popular mobile and desktop wallets are:
- Atomic Wallet (atomicwallet.io), Mobile & Desktop
- Exodus (exodus.io), Mobile & Desktop
- BRD (brd.com), Mobile Only
- Jaxx (Jaxx.io), Mobile Only
