Bitcoin Keys
There are two types of keys that need to be explained: “Public Keys” and “Private keys”
These are crucial to understand in order to self custody your bitcoin in a responsible manner. These keys allow you to send and receive bitcoin without requiring a third party to verify the transactions. You can use these keys to send your bitcoin to anyone, anywhere, at any time with zero permission from any institution or individual. "Public" and "Private" keys work together as a key pair. Your public key is derived/created from your private key. This Public key is able to be shared to receive transactions, much like a BSB and Acct number or postal address. Your Private key on the other hand MUST be kept secret and secure at all cost! Private keys act as your “password” or your “Digital Signature” to sign transactions. Possession of the Private key gives you complete ownership and control over your bitcoin and subsequently the authority to send funds from your storage wallet. Essentially when you say you own bitcoin, what you’re really saying is you have a private key or set of private keys that proves ownership of that bitcoin.
If anyone has access to these private keys, they will have access to any bitcoin associated with those keys.
A phrase that has permeated the Bitcoin space for good reason is: “Not your keys, not your coins”.
So how do i get my keys?
There are 3 main ways we can get our keys.
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Use wallet selected software to generate them.
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Utilise a hardware wallet to generate them.
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Create them ourselves offline using dice or using Entropia Seed Tablets.
Creating Your Own Bitcoin Keys:
This is a slightly more technical and less common approach for beginners, often used by those who hold substantial amounts of value in bitcoin and want complete control over their keys without relying on third party software.
We will take a look into this further down the line.
Using a Bitcoin Wallet to Generate Keys:
This is the most common method for obtaining Bitcoin keys for beginners.
When you set up a bitcoin wallet, it automatically generates a new pair of keys. These will be given to you in the form of a 12 to 24 word "mnemonic seed phrase".
E.g: Below
A mnemonic seed phrase is a random set of words to represent your keys. This is necessary as a private key in its natural form is far too difficult to remember.
Note: Remember your public key is derived (or birthed from) from your private key! So this mnemonic seed phrase is your keys!
E.g below
This seed phrase is crucial to keep your wallet secure so make sure you write them down safely. Do not take screenshots or photos!
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It is highly recommended you store these on durable materials such as high marine grade 316 stainless steel. There are multiple options online for these, my personal favorite for beginners is > BillFold
“Not your keys, not your coins”
What happens if I lose/damage my phone or laptop that I have my software wallet on?
Easy! If you have understood the importance of your mnemonic seed phrase and you have stored these safely as suggested, recovering your funds will be a breeze. All that needs to be done is to reinstall your wallet of choice onto your new device and import your seed phrase and magic! You have just recovered your funds.
We will do this practical exercise in “creating your fist hot wallet”
“Not your keys, not your coins”
