How a private key works
A wallet generates the key at random, as a number so large that guessing it is not feasible. From the private key it computes a public key, and from the public key an address. The calculation runs one way only: an address reveals nothing useful about the key behind it.
To spend, the wallet signs the transaction with the private key. Every node can check the signature against the public key, without ever seeing the private one.
Most wallets do not store keys one by one. They derive them all from a single seed, shown to the user as a recovery phrase.
Who holds the private key
The answer defines the product. In self-custody the user holds the key and the provider cannot move or freeze the assets. In a custodial service the provider holds it and the user has a claim on a balance.
EU law draws its line in the same place. MiCA defines custody as safekeeping or controlling, on behalf of clients, crypto-assets or the means of access to them, where applicable in the form of private cryptographic keys.
How private keys are protected
- Hardware wallets and secure elements, for individuals
- Hardware security modules, for servers
- Multi-party computation: the key is split into shares and never assembled
- Multisig: several keys must sign
- Cold storage: keys kept on systems that are never online
Private key, public key or seed phrase?
- Public key
- Derived from the private key and safe to share. It verifies signatures and gives the address.
- Seed phrase
- A list of words that encodes the seed from which all of a wallet's private keys are derived. Whoever has the phrase has every key.
- Password
- Protects access to an app or to an encrypted copy of the key. A password can be reset, a private key cannot.
Where a private key shows up in a platform
Modules that do the work
- Custody & walletsWallets on every major chain, with MPC custody from leading providers or your own keys.
- AuthenticationSign-in, passkeys and second factors for customers and staff, on your identity provider or ours.
Platforms that need it
Guides that go deeper
Where it is written
The laws and standards this page's facts come from.
General information, not legal advice: what applies to you depends on your services and your market.