Crypto private keys are complicated: A step towards simplicity
Reading Time: 4 minutes ; Published: 1 year ago on April 30, 2022
Cast your mind back to when you were new to cryptocurrency and all the hoops you had to jump through to get involved in the market. Most newcomers find learning about crypto security and the safekeeping of private keys to be complex and daunting. This means that private key management can be intimidating to new crypto adopters, probably holding back a significant number of people from taking the plunge into crypto.
Think about it: How many people are willing to keep hundreds or thousands of dollars in crypto, if they know their funds are not secure? The other side of the equation is: How many typical internet users are willing to go through the currently intimidating and complex process of private key management to keep their funds secure?
A simple way to manage private keys, with acceptable security measures, is necessary for crypto to be more widely adopted. Upgraded solutions will almost certainly reduce the friction and concerns of people considering entering the crypto market and that should be good news for wider crypto adoption.
How Do The Winklevoss Twins Secure Their Bitcoin?
There is little doubt that when it comes to cryptocurrency, the Winklevoss twins know what they are doing. After all, they had enough faith in Bitcoin in 2012 to use a large portion of their settlement with Mark Zuckerberg to go out and buy 120,000 Bitcoins at less than $10 each. Also, the twins own and operate Gemini, one of the most respected crypto exchanges in the space.
So how are these crypto billionaires managing their private keys? Well, they decided to create a ‘cold wallet’, which just means that they printed off the key to access their Bitcoin on a piece of paper. The problem is that if anyone got hold of this private key, they could get access to the Twins untold millions. That’s where private key management comes into play.
To further secure their Bitcoin fortune, the Winklevoss Twins cut the piece of paper with their private key on it into separate pieces and stored it in different bank vaults around the world. This means that anyone wanting to access the Winklevoss Bitcoin fortune would have to work out which bank vaults the private key pieces were in, break in and retrieve the pieces of paper. This private key management may seem extreme. However, we must remember that the amount of money we are talking about is astronomical and the Winklevoss twins have managed their private keys in a way that they personally feel comfortable with.
Remember, the best private key management strategy for you is whatever you personally feel comfortable with and what is viable. Somehow, we doubt that everyone buying $1,000 worth of Bitcoin is going to find it viable or worth the hassle to open up safe deposit boxes in multiple locations throughout the world.
How About Keeping Your Private Key Under Your Bed?
We suspect that the majority of people in crypto have a single printout of their private keys and are storing this in their home. Some may say that this form of cryptocurrency private key management is adequate. However, the issue is that many people find this way of keeping private keys intimidating and daunting.
Think about it, what’s the difference between keeping $1,000 in cash in your house and a private key that can access $1,000? The truth is that many people don’t feel comfortable holding so much value in their homes due to safety concerns. The next problem is that it’s quite easy to lose a scrap of paper or to spill some water on it. Also, what happens if there is a fire in your house? For many people, all these considerations and worries about proper private key management are simply too much and put people off from getting involved in crypto in the first place.
At the end of the day, most people just want an easy and secure way to store their crypto. At present, the commonly recommended private key management strategies have too many hoops to jump through for most people.
A New Easy Way To Manage Private Keys
The current problem of complex private key management and the obstacles it presents to wider crypto adoption has not been lost on players in the cryptocurrency space. It’s an issue that some of the brightest minds in crypto are tackling and aiming to solve.
The solution found by Team Nimiq was to devise a user-friendly way for private key management that is the one currently being used in the official wallet for Nimiq, the first browser-based blockchain, with a focus on simplicity.
In a nutshell, the "Image Wallet"—as it's called this new way to store a user’s private keys in an easy to use and scannable QR code—gives the user the option of either printing out the encrypted private keys or even storing it on their mobile device. The encryption is done by requiring each user to select a password. This means that in order to access the contents on the "image wallet" and the funds, a user needs both the image with the QR code and the password that secures it. That would certainly would be more than secure enough for most people and, even better, is so simple to use and works in a way that most internet users are already familiar with.
Even though the Image Wallet is still in beta, it certainly gives cryptocurrency supporters a significantly easier, simple and secure way to manage their private keys. It will certainly be interesting to see what more developments come to improve this technology.
If you’re in a similar position to the Winklevoss Twins, then perhaps the best way for you to manage your private keys and keep your funds safe is by using multiple bank vaults throughout the world. However, for everyone else, the most straightforward solution could be the Image Wallet.