A private key is a string of randomly generated letters and numbers used alongside an algorithm to encrypt and decrypt data. It can be in the form of a 256-character-long binary code, a QR code, a 64-digit hexadecimal code, or a mnemonic phrase.
Regardless of their form, private keys are an integral part of Bitcoin and other cryptocurrencies, as they enable crypto wallet users to access their funds and authenticate transactions, similar in function to a password. With a private key, a user can generate a public key using an advanced mathematical algorithm. Then a similar algorithm can be used to generate a receiving crypto wallet address from the public key.
When a transaction is first initiated, the crypto wallet software automatically generates a digital signature through the private key. This enforces its security because only a private key can generate a valid signature for a given transaction, which is then used to confirm the transaction from a specific user and protect it from any alteration. If the transaction is edited in any way, the signature is deemed invalid.
It is important to keep private keys in a secure location because, if lost, the user can no longer prove ownership of — or access — their funds.
