Best Practices for Key Security for Your Crypto Wallets

Cryptographic keys are a requirement for any security system. They manage everything, including data encryption and decryption as well as user authentication. A company's overall security system might be brought down by a single compromised cryptographic key, giving a hacker access to additional sources of classified information or the ability to decode sensitive data. If keys and the components that relate to them are maintained appropriately, confidential information can be preserved safely.

What Are Private Keys?

In the blockchain world, your private keys are your most priceless belongings. Private keys are what store information about your cryptocurrency holdings and spending limits. You won't be able to get your currencies back if you misplace your private keys or they are stolen. The safe administration of your private keys is crucial when working with cryptocurrencies and blockchains.

Best Practices for Securing Your Private Keys

These basic practices can help your cryptocurrency wallet become more secure.

Automate

Automation is a popular strategy used to prevent keys from being overused and going beyond their crypto period. The creation of new keys, routine key backups, distribution of keys, revocation of keys, and destruction of keys are all further aspects of the key lifecycle that can be automated.

Setting up a Key Management System

A key management system (KMS) is a tool that is used to create, store, and use cryptographic keys in a secure manner. In addition, to manage digital signatures, it is used to encrypt communications, protect data, and authenticate devices. Organizations and individuals often employ a KMS to manage their cryptographic keys and make sure they are used properly.

One such example is the Tatum Key Management System (KMS), which is an open-source tool for custodial applications in buildings. It is easy to use while providing a high level of security. In this tool, you have full control over the final wallet mnemonics and private keys.

With a KMS, we can easily build and expand custodial apps with ease, providing clients with the highest level of security, and enabling them to have access to blockchain technology without enduring the hassle of dealing with private keys and mnemonics. With just their login information, end users can access your app, and KMS will handle the rest. Let's look at a quick demonstration.

Using Tatum KMS to Generate and Execute Transactions

With Tatum, you may safely create wallets, addresses, private keys, and transaction signatures. Because your confidential data is encrypted and kept on your server, you never need to be concerned about what would happen if it were somehow captured.

The Tatum KMS may be used to safely generate and store private keys, which can subsequently be applied to local transactions to sign them. Working with private keys in this manner is the safest and most advisable method.

After creating your wallet, you will receive a signature ID, which is used in place of the wallet's mnemonic (which would be a series of words). In order for KMS to run in the background and search for pending transactions to sign and broadcast, you must first enable Daemon mode.

Enter the following code on your local server to enable Daemon mode:

tatum-kms daemon --path=wallet.dat --testnet --api-key=your-testnet-api-key --period=10

Now, you can initiate your transactions by simply inserting the signature ID of the private key that was created by KMS in the "signatureId" field in place of the "fromPrivateKey" field to use the KMS instead.

Note: Never share your private key and signature ID with anyone else.

Since you have turned on Daemon mode, the KMS is currently reviewing any pending transactions. You may now obtain information about the transaction you just completed using the Gettransactiondetails endpoint. Now, just copy and paste this command to retrieve your transaction details (make sure to enter the KMS transaction ID).

curl --request GET
--url https://api-eu1.tatum.io/v3/kms/"enter the kms transaction ID"
--header 'x-api-key: your-testnet-api-key-from-tatum'

The output will provide the details of your transaction.

Avoid public Wi-Fi

Make sure your internet connection is safe while you are online, and if at all possible, stay away from public Wi-Fi networks. It's also advised to use a VPN to obfuscate your IP address and stop DNS leaks.

Split Keys

Splitting the keys into different pieces is a good practice to make sure that any key management system is strong. This means that numerous people must work together to use the key because no one person has complete knowledge of it. This ensures that if someone else's key is compromised, their peers will be able to hold them accountable.

Enforce Policies

Many companies create and enforce security regulations regarding encryption keys to preserve the safety and compliance of their key management system. Everyone in the company must abide by the security regulations, which also provide a different way to keep track of who has access to the encryption keys and who doesn't.

Avoid hard-coding keys

The most crucial cryptographic key management strategy is to never hard-code key values anywhere. When a key is hard-coded into open-source code or any other type of code, the key is immediately compromised. The key value of one of your encryption keys is now accessible to anyone with that code, making the key unsafe.

Least privilege

The least privilege principle states that users should only have access to keys that are absolutely required for their job. This makes key usage tracking easier and guarantees that only individuals with permissions can access crucial cryptographic keys. Fewer persons can access a compromised or abused key, which lowers the pool of potential suspects if an incident happens within the organization.

Conclusion

It's essential to keep these things in mind when securing your crypto wallet to guarantee that your funds are as secure as possible. Wallet security is a complicated problem in the cryptocurrency network---the crypto wallet attack surface is massive, making it a profitable target for attackers. It's crucial to examine the security of your crypto wallets holistically because any confluence of flaws, bad design, or errors could lead to money loss.