Category Archives for "Bitcoin Transactions"

May 14

Bitcoin Transaction Private key – Encryption and Decryption process

By Admin | Bitcoin News , Bitcoin Transactions , Crypto Currency News , The Crypto Wealth Formula

Bitcoin Transaction Private key – Encryption and Decryption process

Cryptocurrency is the most vulnerable investment medium which is prone to security issues, theft, malware attack and loss of data. Attackers are just waiting for avenues and opportunities to steal the private keys associated with the Bitcoin wallets. As private keys are the core of a Bitcoin transaction done from a Bitcoin wallet, attackers are behind the private key.

The knowledge of private key alone is enough for a person to access and perform operations from the Bitcoin wallet. Hence if one looses the private key data, all the Bitcoins in the wallet are at risk. Private keys associated with Bitcoin wallets can either be stored on the web, on the hardware or on printed paper in case of paper wallets.

Bitcoin Transaction Private key – Encryption and Decryption process

Private keys become vulnerable from storage media’s in case of cold wallets and communication channels in case of hot wallets. The private key is at the risk of attack even while a Bitcoin transaction is being processed from a Bitcoin wallet. Bitcoin wallet owners need to be extremely cautious while storing and transmitting private keys to and from the Bitcoin wallets.

Taking regular back up of the Bitcoin wallets can help to a certain extent, but there are more secure ways that one needs to adopt in order to prevent misuse of private keys from the Bitcoin wallets.

Encryption and decryption of Private keys –

Cryptography of public and private keys takes place through a mathematical algorithm. A public key is derived from a private key by addressing a set of mathematical operations defined in a set of Elliptic Curve Cryptography (ECC). A public key can be derived from a private key, but a reverse action is not possible in this mechanism as these are based on mathematical trapdoor where a function is easy to perform in one direction but practically impossible in another direction. Hence a public address is derived from a public key and a public key is derived from a private key. The private keys can then be encrypted which will secure the Bitcoin transactions. The user will need to decrypt the private key in order to perform sending or receiving transactions from the Bitcoin wallets.

Bitcoin Transaction Private key – Encryption and Decryption process

A highly reliable solution to secure private keys is encryption. Bitcoin wallets or software wallets offer the mechanism to encrypt the private keys. Encrypted private keys will require being decrypted before use, hence even if there is a loss or theft of private keys, if the user is not able to decrypt the encrypted file for the private key, then the private key remains to be safe and unused. The difficulty of the decryption depends on the level of encryption done on the file. The user needs to adopt high standards to encrypt the private key file in the Bitcoin wallets.

The simplest way to encrypt a wallet file is using a password. Another way to perform encryptions is when the private key is encrypted using the master key which is entirely random. The master key is then again encrypted using a key which is derived from a passphrase using the open SSL technology. This is known as multiple encryptions of the software wallets.

As the public and private key pair is mathematically related, what can be encrypted with a public key can be decrypted only with a private key.

Bitcoin Transaction Private key – Encryption and Decryption process

Encryption can only reduce the risk to a certain level but not eliminate in total. Cryptocurrencies are at the highest degree of vulnerability in spite of a number of mechanisms involved to protect and ensure safe cryptocurrency transactions. There are newer ways that are being detected that shows different ways in which the private keys are stolen or attacked by malware. Trading and investing in cryptocurrencies requires vast amount of knowledge about the technology and the way transactions are taking place. Amateur users who indulge in cryptocurrency trading and investments often end up losing all of their money. Hence one is advised to take precautions and adopt secure means while dealing in cryptocurrencies.

May 14

Bitcoin Transaction Private Key

By Admin | Bitcoin News , Bitcoin Transactions , Crypto Currency News , The Crypto Wealth Formula

Bitcoin transactions and the private key

Bitcoin transactions are carried out through Bitcoin wallets. Bitcoin wallets are authorized by a public address and a private key for sending and receiving Bitcoins from the Bitcoin wallets. Private keys play a vital role in Bitcoin transactions. There are different types of Bitcoin wallets based on characteristics and functionalities, but all Bitcoin wallets have a private key for authenticating transactions. Bitcoin is secured through digital message signatures created with a unique private key. Bitcoin transactions are carried out using the public address and the private key, and the private key allows users to identify each other when a Bitcoin transaction is carried out.

The role of public and private keys in Bitcoin transactions –

The public and private keys in a Bitcoin wallet are mathematically linked through a signature algorithm.

  • The public key or the public address is used to identify a sender or a recipient. Just like the email address, the public key can be distributed to others for identity purpose.
  • On the other hand, the private key is used together with the public key to create a non forgeable message signature.

The private key is highly important and should be kept as a secret unlike the public key which can be distributed to others. The private key requires a lot of security measures as it is the underlying base for Bitcoin transactions.

Bitcoin transactions and the private key

Bitcoin transactions and the private key – all you need to know!

The knowledge of private key is the only requirement for one to conduct Bitcoin transactions; hence private keys should be kept a secret. Features of private keys include –

  • Private keys are just a number between 1 and about 10 selected from a very large range.
  • Private keys play a fundamental role in securing the Bitcoin network.
  • Private keys are nothing but a digital signature that prevents forgery in Bitcoin transactions.
  • Public addresses are derived from public keys which are in turn derived from private keys
  • Bitcoin transactions are nothing but messages signed with a private key.
Different Formats of the Bitcoin Private Key –

Bitcoins can be easily stolen from a Bitcoin wallet if the private key is easy to guess or in cases when the private key is lost or stolen. Hence it is highly important to choose a secure private key that is hard to crack by a third party. Private keys are generated in different formats that come with encryption and decryption mechanisms.

  • Basic format private key –

A very basic format example of a private key –

basic format example of a private key

The basic format private key is derived from a 256-bit number that can be represented in many ways. It can be in the range of 0-9 or A to F or any 32, 64 or 256 hexadecimal bits.

  • HD wallet format private keys –

Hierarchical deterministic wallets use the BIP 32 seed to generate private keys. The HD wallet consist of a master extended key that consist of a 56-bit private key and a 256-bit chain code, for 512 bits in total.

  • Wallet Import format private keys –

An alternative format for private keys is the wallet import format (WIF). The Wallet import format is the most common way to represent private keys in Bitcoins. The wallet import format private keys begin with the number 5 and are followed by a sequence of letters and numbers. Example of a WIF private key –

 Example of a WIF private key

  • The mini private key format –

Some Bitcoin wallets use the mini Bitcoin private key format. This format is not so common with Bitcoin wallets, but is used in cases where the space is less or with physical Bitcoins. The mini private key is a key associated to the private key of the Bitcoin wallet. Example of mini private key format –

Example of mini private key format

Bitcoins can be spent only once and when they are spent using the private key, the private key becomes worthless. Private keys play a very fundamental role in Bitcoin transactions. Hence one is required to take every possible step to keep the private key safe and secure. One should use the format of the Bitcoin that is the most safe and secure.