An encryption key refers to a set of characters and numbers generated using cryptographic techniques or algorithms (called cyphers) to encrypt or decrypt data. These are often created to encrypt and transmit sensitive data, making it almost impossible for unauthorized parties to gain access without the encryption keys.
For the most part, an encryption key can be symmetric and asymmetric. Symmetric encryption uses a single key for data encryption, whereas asymmetric encryption uses two separate keys, a public and a private one.
The latter one, asymmetric encryption, is the foundation of blockchain technologies. Thus a digital signature is created. These provide integrity and are easily verifiable.
Blockchain and key management
Digital signatures are a vital component of cryptocurrencies. A public key is an address that anyone can view, including the transactions and balance. In contrast, a private key provides access to a public address to perform actions, such as making transactions. From this, we start to understand how important it is to secure these private keys.
If a private key is stolen or lost, it gives unauthorized parties access, or in the best-case scenario, locks you out of your account. This is where key management comes into place. Just like a physical key, you don’t hide them in obvious places, making it easier for others to steal your stuff.
Key management refers to the generation, exchange, storage, use, and annihilation of such keys.
There are many ways an intruder can gain access to private keys, which include: brute force, side-channel attack, physical access, etc. A few key management approaches are:
Private keys are stored on the local storage of the device. This provides quick and easy access to the keys, but there is a high risk of key loss due to physical damage. However, this is not the only downside. Although keys are stored on a private device, they can be stolen from hackers through malicious software or physical access.
This method is rather broad and ranges from words written on paper to physical USB devices. Most notably, the word mnemonic backup phrase includes several random words that can be used to store your keys. From this set of words, the same account can be exported to other devices or stored somewhere safe. It should be noted that the same set of mnemonic phrases always generate the same private-public key pair.
Another way is the backup of the private key to the physical USB storage. Both these methods are very secure as they are not connected to the online world. However, there is the possibility of physical damage, but most importantly, these methods require a lot of time to retrieve private keys.
In this kind of approach, private keys are encrypted using a master password provided by the user. Every action regarding private keys will require the user to enter a password.
Although susceptible to brute force attacks, this management system is one of the strongest and is widely used nowadays when paired with a strong password.
Compared to the previous systems, keys protected with a password can only be hacked using a keylogger or brute force if the password is easy to guess. The biggest drawback is that if the password is forgotten, keys are irretrievable.
There are online platforms that offer these services. Private keys are hosted on the cloud through a third-party server, where the security depends on this third party.
There is no “one-fits-all” solution. However, it is best to use whichever methods suit you. Having read all the information above, you should be able to understand which key management service is best for you. Keep in mind always using strong passwords and keeping your private devices secure and up to date to avoid compromisations.