The private keys associated with a cryptocurrency wallet are crucial to users. One can not claim ownership over funds or spend them without those keys.
There is a famous saying in the industry: “not your keys, not your coins”, confirming the importance of this information.
However, dealing with private keys can be a hassle, warranting innovative solutions to change their core dynamics.
As society gravitates toward digital payment solutions, they will begin to use more digital wallets. Those wallets come as computer software or a mobile application more often than not.
However, these solutions are often custodial, meaning someone else – a company or service provider – will hold on to user funds.
That approach creates a layer of trust and reliability, as there is a recourse if something goes awry.
Things work a bit differently when using cryptocurrencies. Although custodial wallets exist, most solutions will give the user full control.
That means there is no third-party involvement, allowing for financial freedom. However, that power comes with many responsibilities, including managing one’s wallet and private keys.
It is impossible to spend funds in that wallet without those private keys.
Private keys can consist of a long string of numbers and letters or a seed phrase of 8-24 words. Either option is essential and needs to be backed up safely for safekeeping.
That is usually where the trouble begins for novice users, as this is a radically different approach from what they are used to.
Being responsible for this crucial information and the inability to recover it if it gets lost is rather daunting.
Moreover, every wallet address on every blockchain one uses can have different private keys. That means there is a lot of information to backup and store securely.
Private key management is essential, although keeping it in a text file on a computer isn’t the best idea.
Most users will put it down on paper and keep it stashed away, either as a whole or by keeping different parts in various locations.
The obvious answer is to develop ways to secure private keys while maintaining access to them if necessary.
Several approaches can be explored to explore this goal, even though they are not necessarily novice user-friendly.
The first option is to store private keys on your computer or mobile device and limit access.
More specifically, ensuring few people besides you can access them or find this information is an essential first step. However, that option still suffers from poor access control and might not be ideal in most situations.
A second option is to encrypt your wallet’s private keys (s) and store them in a protected folder. Adding a password to that folder can help.
Even if someone else guesses the password, they will still need to decrypt the private key information. It is often too much work for a culprit, although it is not a perfect solution either.
If you replace the device and forget about the private keys or the protected folder, you will still lose access to funds.
Option #3 is perhaps the most convenient solution, although it requires buying an external hardware device.
Referred to as “hardware crypto wallets”, these devices ensure all private key information resides only on the device and is never broadcasted online.
A hardware wallet will have a cost, although models are relatively affordable. Moreover, they can support multiple cryptocurrencies, which can benefit many users.
As the management of private keys remains an arduous task, crypto and blockchain companies come up with new ideas. T
aking Avarta as an example, it users biometrics to serve as private keys for multiple blockchains. More specifically, its advanced security-enabled identity conveniently introduces private key management.
It removes the need for passwords, seed phrases writing down the keys, etc. Moreover, this secure identity approach paves the way for faster onboarding for lending, borrowing, DeFi, and more.
Moreover, Avarta ensures users can combine private keys to multiple blockchains and wallets into their digital identity portfolio.
Moreover, the digital identity will feature oneś entire transaction history, introducing a sense of trust that can be leveraged as a credit rating. Users will control the data they share and who they share it with.
People tend to overlook many aspects of private keys, including how challenging it can be to manage everything.
However, there are also many opportunities ahead for companies looking to take the private key concept in a different direction.
Linking it to digital identity is one viable option, especially if it provides access to one’s wallets across multiple blockchains.
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