A private key is a string of numbers that bitcoins are assigned to, and it’s essential to understand the importance in managing and securing your own private key(s).
There’s two types of numerical sequences that all bitcoiners should be cognizant of, and they include your public and private keys. The name of the numerical sequences describe them well, as it’s perfectly fine to show others your public keys, but your private keys should be kept away from others no matter what.
The reason is simple, if someone has your private keys, they have access to whatever bitcoin(s) are assigned to that numerical sequence. All they have to do from there is import or sweep the keys into their own wallet, and there’s no action that you can take to stop that. For this very reason, it would seem obvious to keep your private keys hidden, but quite the contrary occurs in reality.
Many people who use bitcoin don’t quite understand every facet of it, and sometimes that misunderstanding involves personal wallets and private keys. Instead of securely storing their private keys in cold storage, (offline) some choose the easier route of simply keeping their bitcoins in an online wallet, (known as hot storage) be it on a website or app.
In the bitcoin community, there are many stories of people who have lost their bitcoins because of their own personal negligence, be it through having their accounts logged into or their phones stolen. Bitcoin is still in a very early stage, in fact the majority of people have yet to hear about the term at all. This early stage requires a certain degree of responsibility for those that do get involved, as in the end there’s likely no recourse that can be taken for lost funds.
Instead of keeping your funds on an online wallet like blockchain or Coinbase, consider exporting those funds to a paper wallet, a medium of cold storage. With Apple announcing that apps can once again be created for ‘virtual currency’ use, a growing number of people will likely be enticed to store their bitcoins on their phones. These apps will often require the importation of your private keys though, (not always the case) which technically requires you as the user to have a certain degree of trust for the app and the people behind it. Just like an online wallet, an app can also be breached into, either internally or externally. Now the advice isn’t that you should avoid bitcoin apps, but rather choose carefully when allowing for third parties to gain access to your funds.
In the event of criminal negligence on the side of a third party, legal action can often times be taken. The problem remains though that no government body insures bitcoin, and that it’s hard to prove stolen funds on an accurate basis as third parties aren’t required to disclose who owns what, as regulation is currently minimal at this stage.
It’s up to you to decide if you want to give others access to your bitcoins or not, but due diligence should be taken to verify the credibility of all parties in which you give your trust to. If for whatever reason you lose the private keys that your bitcoins were associated with, there’s no way in which you can retrieve your funds. While this could be an argument against cold storage, the same could be said about a piece of jewelry; once you lose it it’s likely gone for good. It’s important to determine your own technical abilities, as having some technical competence can go far when trying to understand terminology like public keys, private keys, cold storage, and hot storage to name a few. The reasons why controlling your private keys is important is simple really, as not having control can potentially lead to losses of bitcoin(s).