4 ways to protect cryptographic keys

Those new to crypto might wonder exactly how safe their investments are from potential hackers and thieves. The first step of safe investing in crypto is to have a basic understanding of cryptographic keys, and the central role they play in authentication and keeping your investments safe.

Safe investing, especially when it comes to cryptocurrency, is crucial if you want to protect your investments. Especially when it comes to the crypto world, where there are potential scams that can target new investors who don’t have the proper knowledge of how to invest safely.

What are cryptographic keys?

Cryptographic keys are used in cryptography to keep digital transactions safe. They aren’t just used by cryptocurrencies, but also digital banking and other digital services that require a high level of data security. 

These keys are a string of characters that are used within an algorithm to lock or unlock encrypted data.

In the context of cryptocurrency, cryptographic keys are used in crypto wallets to store your crypto and make sure that you are the only one who can access it.

These keys are used in both hardware, or cold wallets, and software, or hot, wallets. There are two types of keys: a public key and a private key. These keys interact together to help you send and receive transactions. 

Think of a public key as the address that people use to send the money to your wallet. Anyone sending you crypto can see the address, but they won’t be able to access the funds behind it unless they also have your private key, which functions as a form of authentication, like a password.

It’s important that you protect this private cryptographic key at all times. Cold wallets will be the most secure option because the private key will be kept on a physical device. This is especially the case if you have a large crypto investment.

Hot wallets, on the other hand, are connected to the internet and store your private keys online. While they can still be secure, they won’t have the exact same security as a cold wallet. Hot wallets include the wallets that you receive automatically when you open up an account on a centralized or decentralized exchange. 

For this reason, you need to make sure you choose an exchange with a solid reputation behind it before entering your data on it. Ideally, you would move your crypto off the exchange altogether and into another wallet platform.

These cryptographic keys are what a hacker would target to access your investments or data. If they get access to your keys, then that’s all they need to steal your funds. 

So, now that you know what public and private cryptographic keys are, what are the best ways to protect them?

4 ways to protect cryptographic keys

1. Use hardware systems

A hardware-backed security system gives the ultimate level of security for protecting cryptographic keys (though of course, it’s not 100% hack-proof). 

Hardware systems, also known as Hardware Security Modules (HSM), are physical devices that store your private keys. While they are connected to the computer’s network, they are standalone devices that are not directly connected to the computer’s server.

You can think of HSMs as vending machines. With a vending machine, you input money in order to receive the food, or your desired output, without ever going inside or touching the internal workings of the machine. 

HSMs work much the same way. They store your private keys securely inside and can generate outputs based on an authorized user’s inputs, all without ever exposing the keys directly. This is because all commands are executed within the device, so the only thing the user ever receives is the desired output. 

A private key cannot be removed or exported from the HSM, and old keys can even be destroyed within the device when they expire. Then, the HSM can generate new keys.

The major downside to HSMs is they are very expensive for a business to install and maintain, typically around tens of thousands of dollars.

Instead, an alternative might be to use a cloud-based HSM, where you can pay to use an HSM vendor’s device. 

2. Use white-box cryptography

White-box cryptography is the next best alternative to hardware (or black-box) systems. Whereas black-box systems mean that nobody can access or see what is going on within the physical device, white-box systems are the opposite. 

White-box cryptography is not a physical device. Instead, it’s an extremely complex process of mathematical and code obfuscation that is used to embed private keys within the code of an application. 

As the name would suggest, white-box cryptography allows everyone, including any potential hackers, to see what’s going on inside the system. It essentially hides the private key in plain sight by creating complex code around it.

While this might sound counter-intuitive, it works because white-box cryptography uses these complex encryption techniques to make the private key blend into the application’s source code.

While any potential hackers have access to this source code, it’s extremely difficult to find which part of it is the key.

One downside to white-box cryptography is that it can cause longer loading times for the website or application. But as long as the business keeps this in mind, then they can make adjustments that maintain their site performance at a sufficient speed.

While white-box cryptography is not nearly as secure as a hardware device, they are much cheaper and can be used across different platforms and coding languages. 

3. Never reuse keys

Just like you shouldn’t reuse your password for multiple websites, it’s important not to use the same cryptographic key for different purposes. Cryptographic keys are used for everything from encryption, authentication, and digital signatures. There are even keys that encrypt other keys. 

Even though it might seem unnecessary to have so many different keys, using the same key for multiple purposes opens the door to a potential hacker accessing more than one system. 

For this reason, it’s best to take the extra step of ensuring everything has its own unique private key. This way, your cryptographic keys will stay safe in the event of a cyber attack.

4. Use multi-factor authentication (MFA) and control who has access to the keys

Another important way to keep cryptographic keys secure is to use multi-factor authentication and restrict who has access to the keys. Unlike two-factor authentication, MFA goes a step further and requires users to submit two or more pieces of evidence to verify their identity. 

In addition to that, restrict who has access to the keys. Only allow users to have controlled access to the keys, and make sure they can only do so after receiving explicit permission.

The future of safe investing in cryptocurrency

As the crypto market continues to grow, it will only be more important to ensure people can invest in cryptocurrency safely without fear of a potential hack. While any of these methods to protect cryptographic keys can be used for safe investing, it may be best to use a combination to have the highest standard of security possible. 

So, what can individual investors do on their side to make sure their keys stay safe? As previously mentioned, it’s generally recommended to use a cold wallet, especially for large investments. But at the very least, it’s best to remove your crypto from an exchange and use a hot wallet instead.

Other security measures to protect your crypto wallets include researching a cryptocurrency before investing, spreading your investments across multiple wallets, changing your passwords regularly, using 2FA or MFA, using a VPN, and having antivirus software installed on your device.