Private key

The secret number that authorises a change to a ledger entry. Whoever holds it controls the asset, nobody else can move it, and nobody can restore it.

Example

A recovery phrase is a human-readable form of the key, which is why a phrase somebody else finds is a holding somebody else owns.

Important

No institution holds a copy. A lost key is not an access problem to be resolved with identity documents - the entry stays on the ledger permanently beyond reach.

Related terms

• Self-custody — Holding the private key to your own digital assets, rather than leaving them with a trading venue or a custodian that holds the key for you.
• Digital asset — An entry on a shared ledger, transferable by whoever holds the private key controlling it. Unlike every other instrument in this curriculum it is not a claim on an issuer, a company or a borrower.
• Distributed ledger — A shared record maintained and checked by many independent computers, in which a settled transfer cannot be reversed by any of them.

Lessons that explain it

• A secret number, and one line in a shared record — What you own is not a coin and not a claim on anybody. It is the ability to authorise a change to one entry on a ledger - and who holds that ability is the whole of the risk. (10 min)

All 578 terms in the Investing glossary