The primary use of Bitcoin private keys is making irreversible transactions, they are essentially a key so you can send your Bitcoins to anyone. This is irreversible and it is guaranteed by a mathematical signature which is connected to each transaction only when you use the private keys to send bitcoin. Additionally, every transaction you make the signature will be different and unique although they are generated from the same private keys.
Public Key Cryptography and Cryptocurrency
By having this feature, it means that it cannot be copied and the user will be able to use the same private key repeatedly. The way that private keys work is that it signs transactions with your unique key and by having a different signature every time it will prevent forgery. Since it is a requirement for every transaction made, you will need a digital signature which is the private key. Having a wallet will generate a signature by mathematically processing a transaction together with the right private key.
People with a signature and public key will be able to easily authenticate a transaction. However, you can only produce a valid transaction signature if you use the private key matching the published public key. Any verified transactions that have a valid signature will be accepted by the Bitcoin network. While at the same time, any person that owns a private key can sign a transaction. These two factors mean that if someone knows your private key , it may be possible to steal funds from you.
There are many ways for thieves to steal private keys , the main 2 ways are storage media and communications channels.
Is a Private Key Secure?
This is why you should be extremely cautious when you store or transmit your private keys. Having a software wallet will store private keys in a wallet file on the main hard drive. This will make it a prone to bitcoin-specific malware due to the wallets will often place the file in a standard well-known directory. To prevent possible threats to your software wallet , you can allow an option to encrypt the wallet file. So, if anyone that tries to hack your wallet and try to gain access to your wallet file, will need to decrypt it then. The wallet files can be encrypted on many software wallets by adding a password.
You might be thinking that doing a wallet backup is a good idea, however it could possibly leak your private keys. For example, saving your backup of your software wallet to a cloud storage like Dropbox.
How to generate your very own Bitcoin private key
This could be dangerous since anyone is capable of viewing this backup online that could potentially steal some or all your funds. This same problem could occur if you try an email backup to yourself or leaving a private key within your house. Public keys are generated through private keys utilising a set of mathematical operations known as Elliptic Curve Cryptography ECC.
This is where the private key is a numeral and the public key is 2D coordinate composed of two integers. To simplify the processing of a private key, it can be transformed into a single value.
4. Keys, Addresses - Mastering Bitcoin, 2nd Edition [Book]
One method used is it appends the y-coordinate to the x-coordinate. This method will produce an uncompressed public key. To have a compressed public key, it will only use the x-coordinate with a symmetry flag. As a private key can be transformed into a public ke y through mathematical operations, the public key will then be able to transform into an address. These steps are irreversible meaning that an address cannot generate a private key. It can be a binary string, Base64 string, a WIF key , mnemonic phrase , or finally, a hex string.
For our purposes, we will use a 64 character long hex string.
Why exactly 32 bytes? Great question! More specifically, it uses one particular curve called secpk1. Now, this curve has an order of bits, takes bits as input, and outputs bit integers. And bits is exactly 32 bytes. So, to put it another way, we need 32 bytes of data to feed to this curve algorithm. There is an additional requirement for the private key. So, how do we generate a byte integer?
The first thing that comes to mind is to just use an RNG library in your language of choice. Python even provides a cute way of generating just enough bits:. You see, normal RNG libraries are not intended for cryptography, as they are not very secure. They generate numbers based on a seed, and by default, the seed is the current time.
That way, if you know approximately when I generated the bits above, all you need to do is brute-force a few variants. When you generate a private key, you want to be extremely secure. Remember, if anyone learns the private key, they can easily steal all the coins from the corresponding wallet, and you have no chance of ever getting them back. Along with a standard RNG method, programming languages usually provide a RNG specifically designed for cryptographic operations.
This method is usually much more secure, because it draws entropy straight from the operating system. The result of such RNG is much harder to reproduce. In Python, cryptographically strong RNG is implemented in the secrets module. That is amazing. But can we go deeper? There are sites that generate random numbers for you. We will consider just two here. One is random. Another one is bitaddress. Can random. Definitely, as they have service for generating random bytes. But two problems arise here.
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Can you be sure that it is indeed random? The answer is up to you. Now, bitaddress.
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So how does it work? It uses you — yes, you — as a source of entropy. It asks you to move your mouse or press random keys. You do it long enough to make it infeasible to reproduce the results. Are you interested to see how bitaddress. For educational purposes, we will look at its code and try to reproduce it in Python. Bitaddress creates the entropy in two forms: by mouse movement and by key pressure. Bitaddress does three things.
It initializes byte array, trying to get as much entropy as possible from your computer, it fills the array with the user input, and then it generates a private key. Bitaddress uses the byte array to store entropy. This array is rewritten in cycles, so when the array is filled for the first time, the pointer goes to zero, and the process of filling starts again.
The program initiates an array with bytes from window. Then, it writes a timestamp to get an additional 4 bytes of entropy. Finally, it gets such data as the size of the screen, your time zone, information about browser plugins, your locale, and more. That gives it another 6 bytes. After the initialization, the program continually waits for user input to rewrite initial bytes.
When the user moves the cursor, the program writes the position of the cursor. When the user presses buttons, the program writes the char code of the button pressed. Finally, bitaddress uses accumulated entropy to generate a private key. It needs to generate 32 bytes. The program initializes ARC4 with the current time and collected entropy, then gets bytes one by one 32 times.
This is all an oversimplification of how the program works, but I hope that you get the idea.