Can Crypto Private Keys Be Guessed?

Cryptocurrencies utilise two keys, a private key and public key.

The wallet address is derived from the public key.

A private key is used to verify that a public address belongs to the user, and should be either stored securely or accessed via a hard wallet ie Ledger Nano

In bitcoin and many other cryptocurrencies, the private key is a 256-bit number, however in most cases this number is represented in the form of a 64 digit hexadecimal number for simplicity. 256 bytes in hexadecimal is 32 bytes or 64 characters in the range 0 to F ie 0, 1, 2, 3, 4, 5, 6, 7, 8, 9, A, B, C, D, E, F, 10 etc

A private key is a long number formed from 256 bits. 

In computers, bits are digital switches and have two states – either on/off or 1 or 0, so each bit has a total of two values.

So how easy is it to guess a private key?

2 to the power of 256, written as 2²⁵⁶, can be calculated by multiplying 2 by 2 by 2 etc 256 times ie 2x2x2x2x2x2x2xx2 etc 256 times

Half of 2²⁵⁶ = 2²⁵⁵, not as many people would guess to be 2¹²⁸

2^{256 =} 10⁷⁷ approximately.

That’s 10 to the power of 77 – or 10 x 10 x 10 x 10 etc 77 times

Just how big is this number?

To give you an idea of how big 2²⁵⁶ or 10⁷⁷ is – scientists estimate there to be approximately between 10⁷⁸and 10⁸² atoms in the observable universe!

Therefore, the chance of guessing somebody’s private key are practically impossible even with the most advanced computers on earth today.

How To Find Crypto Gems

There are many YouTubers and crypto gurus on the internet extolling their favourite tokens, but how do we know if these tokens are worth buying or are they just being shilled?

Here we have put together some pointers to help you filter out the gems from the average and scam tokens.

DYOR – Do your own research

Our first step is to search for the token on CoinGecko.com or CoinMarketCap.com.

From here we can find the company website and the white paper.

The white paper gives a summary of the project and explains concisely solutions to existing problems.

From the website, we can determine if the project is finished and if it already has customers. Obviously, the risk will be higher for unfinished projects with no current customers, so bear this in mind.

White paper

Take a good look at the white paper and ask yourself if it has been quickly put together in a few days, or is it a detailed piece of work requiring an educated project management team?

Look at the team behind the project.

Project team

If the team is not listed on the website, go to Linked-In and search for the project. Look at the management team. Have they worked at well-known companies? If so, how long?

Do they have a good educational background in the area of their vocation?

Does the project have good backing from established investors?

Github

Go to Github – is the project listed? Is it open source? If not, that’s a warning sign.

How many people are following the project on Github? – Look at the number of stars and forks.

When was the code last updated? If not recently, it could be an alarm bell.

Have files been updated etc with value code? Who updated the files – marketers or coders.

How is the community – look at Twitter – how many followers?

Look at Facebook – how many followers.

Is the market liquid?

Liquidity is important in trading because it helps to keep the asset price stable. We don’t want to invest in a project with an unstable price.

To find the liquidity of a project, take the daily trading volume and divide it by the market cap. 

Tokens with a volume/market cap ratio of less than 10% means the token is not very liquid and is probably not a good idea to invest in. A good ratio is between 10% and 50%

Examples of liquidity based on prices: 

Theta Market Cap = $626,605,451

Trading Volume = $20,203,934

Volume/Market Cap 0.0322 – in this case the liquidity is less than 10% 

Chainlink Market Cap = $5,096,209,048

Trading Volume = $980,121,958

Volume/Market Cap = 0.1989 – in this case the liquidity is greater than 10% ie 0.1 = 10%

Artificial Intelligence

For those of us who are pushed for time to do research, there is a useful website called TokenMetrics, which uses artificial intelligence to predict future cryptocurrency price moves.

The website is the creation of Ian Balina, who is well-known in the crypto space for his expertise in finding value investments.

The website is not free, but comes with a money back guarantee if you are not completely satisfied with the performance.

You can watch a promotional video here

Beginners Guide to Buying & Storing Cryptocurrency

Cryptocurrency is gaining popularity in the modern world that we now find ourselves living in. At the time of writing the cryptocurrency market cap is around $403 billion dollars – that’s 403 followed by 9 zeros! 

Unfortunately, there are many criminals and scammers who operate in the crypto space, and that makes many people, particularly newbies, extremely vulnerable to this form of investment. 

To address this vulnerability, here is our guide for newbies entering the crypto space

Crypto Security

First of all, invest in a hard wallet such as a Ledger Nano X or Trezor.

What is a Hard Wallet?

A hard wallet is a small device similar to a USB memory stick that you keep yourself – think of a hard wallet as your personal crypto bank.

Acquiring Cryptocurrencies

To purchase cryptocurrencies, you will need to acquire them through a cryptocurrency exchange, such as Binance.com or Coinbase.com. Once you have acquired your crypto assets, you can either leave them on the exchange or move them somewhere else. We recommend that you move your tokens to your hard wallet. Exchanges are vulnerable to hackers, may be closed down by authorities investigating anomalies, and are generally deemed unsafe places to leave your assets.

Crypto Exchanges

In 2014, an exchange called MtGox suspended trading, closed its website, and filed for bankruptcy protection against creditors. Just prior to that time MtGox was the biggest bitcoin exchange in the world and processed up to 70% of all bitcoin transactions. Even the largest crypto exchanges may prevent withdrawals at very short notice.

Since the suspension of MtGox, creditors have not received any of their deposits, and the legal case is still ongoing in 2020. At best, MtGox creditors may receive 25% of their digital assets once the legal process has reached completion, which could by anytime depending on the Japanese legal system.

At the time of writing in 2020, an exchange based in Hong Kong and Malta called OKEx has suspended all withdrawals. This was due to one of the private key holders being investigated by Chinese authorities.

More and more crypto exchanges are appearing every year and so far in 2020, no less than 75 crypto exchanges have shut down.

The point here is that the safest place for your digital assets is a hardware wallet, where you store the keys safely offline. Nobody can shut down your hardware wallet – it’s your personal crypto bank, so invest in one.

One of the most common mistakes newbies make

Many newbies enter the cryptocurrency space by buying bitcoin and then moving to Ethereum and then altcoins. As the hunger for knowledge of digital assets grows, newbies will find some Youtuber or crypto guru who extols the virtue of some unheard-of token or project. Many of these projects will amount to nothing, the price will sink to zero, and these newbies will lose all the money they invested in them. That’s just how it is.

An alternative route into crypto is to simply buy bitcoin or Ethereum at regular time intervals and keep it in your hard wallet.

There is a great website https://www.bitcoindollarcostaverage.com , which illustrates the outcomes of averaging-into bitcoin in your chosen time frame and amount.

Crypto journey

Most newbie investors coming into crypto drift from Bitcoin to Ethereum to altcoins because the rewards can be significantly greater. We’ve all heard Youtubers boast of their 10x, 20x, 100x, or even greater token recommendations. They don’t tell you about all the bad recommendations they’ve given. Alt coin speculating can be rewarding if you buy the right tokens at the right time, but it can be painful if you get it wrong.

What are altcoins?

Most altcoins run on the Ethereum network and meet a standard called ERC20, which is a technical standard that all tokens must meet in order to run on the Ethereum network.

If you have an Ethereum wallet, you can simply send your ERC20 tokens to your Ethereum wallet address and store them there.

How to determine if a token is ERC20

• Search for the token on Coingecko.com or Coinmarketcap.com
• On the token’s page, you will find a contract address under the tokens name with a small icon to copy the address. 
• Copy the address. If there is no contract address the token is probably not ERC20
• Paste the contract address into the search field at https://etherscan.io/
• Verify that the contract address on https://etherscan.io/ is listed as the token
• If the token is listed on Etherscan as your token, then it is ERC20

A significant amount of the people who have made good profits in cryptocurrency are simply HODlers. These are investors who accumulate bitcoin or Ethereum and store it as a long term investment. HODL – means ‘Hold on for dear life’, and is a term often used in crypto.

Altcoins may be good investments during alt coin seasons, which usually take place when Bitcoin(BTC) loses its dominance. You can check Bitcoin’s dominance here – if the trend is down, it maybe a good time to enter the altcoin market. However, altcoins should be treated as higher risk / higher reward assets and you should not go all in on one token. Only risk what you are prepared to totally lose on altcoins – view them as wild cards.

Altcoin research

One more thing with regards to altcoins is to do your own research (DYOR)

Do not just take a Youtuber or other tipsters advice blindly.

You can research a project by first going to coingecko.com or CoinMarketCap.com and searching for the altcoin. Once you have found the altcoin, you can visit the project website or view a basic chart. This will give you an overview of the project. From there, you can drill down into specifics and try and see the project from a user’s perspective.

Which Wallet to store your ERC20 Tokens?

Check out our guides here How to Send or Receive ERC-20 Tokens with Ledger Nano and Beginners Guide to Buying & Storing Cryptocurrency