Security always has and will always be a concern in finance and financial infrastructure. To be able to conduct secure transactions is as essential in decentralized finance as it is in centralized finance.
In decentralized finance, security is a feature that cannot be overemphasized, especially when it concerns digital assets and smart contracts. This has prompted many developments and upgrades as it affects the security of assets and users.
Algorand has over time proven to be a force to reckon with when it comes to developing groundbreaking features on the crypto and blockchain networks.
Due to the efficiency and scalability of the network, Algorand has been regarded as the next generation of financial products through its pure Proof-of-Stake protocol. So, when Algorand unveiled its Rekeying strategy as a means of improving digital security, it was welcomed with many appraisals of the network.
Today, we shall be looking at the concept of Algorand’s Rekeying and how it helps to bolster the security of digital assets.
To fully understand and appreciate the whole concept of Algorand’s Rekeying, there is a need first to understand what digital keys are and how they work.
To be able to make transactions with crypto assets, users must first have to possess a crypto wallet. This wallet serves as a recipient to assets sent to the user, and the user is also able to make transactions to other users from this wallet.
The cryptocurrency wallet comes with an automatically generated public address. A public key manages this available address; it is visible to every user on the platform and serves as a destination for receiving digital assets.
There is a second digital key called the private key. This key, also generated with the crypto wallet, is unique to the user, guaranteeing the security of the wallet. They are used for the authentication and encryption of the public address. The user gains full control of his assets via this key and may also use the key to recover a lost crypto wallet.
The combination of both keys serve to guarantee the security of the user’s digital assets; however, there remains a problem associated with this method.
The Problem of Digital Keys
The private key of a user may be compromised when a malicious user gets access to it. When this happens, the affected user would need to change their private keys or an entirely new account with a different pubic address and the private key would have to open and all assets would have to be moved from the old account to the new one. This entire process can be very tedious, in addition to having undesirable implications.
Because the public address would be changed with the change of a public key, the user would have to provide the new public address to others for identification. For users who constantly change their private spending key because of their high-security awareness, they would have to keep sending their new public addresses to others for continuous identification and update on their transacting address.
The problem gets even worse especially due to the interruptions it could cause in automated transactions with institutions and peers because of the need to update existing public addresses constantly.
There is an even greater concern when it comes to vendors and institutions which keep track of the changing public addresses due to the amount of work they will need to do. There can be significant operational issues arising from custody providers (like banks, hedge funds, money lenders, etc.) having to move customer funds from one public address to another consistently.
Rekeying — The Solution
Rekeying, the first of its kind, developed by Algorand, had come about to eliminate the issue of a constant change in the public address. This is possible because users can make changes to their private spending keys while still retaining their public addresses.
Users who may have exposed their private spending keys or whose keys are suspected of having been compromised can immediately make changes to the keys without having to change their public address. Thus, their public address remains the same, and other users having the public address would not need to worry over the possible change over some time.
In my next articles, I will give a deeper insight into rekeying with Algorand and how it works. There are very many things to learn and use in this particular new feature. It has applications all over the economies of the world and in different transaction types, especially financial, and I can’t wait to share them all with you.
Rekeying allows for more flexibility in the sense that users can change their private spending key anytime they want and continue to use the same public address for receiving and keeping their assets.
It further allows for more operational efficiency as identifiers and custody providers (like banks) can continuously transact with the same public address due to the eliminated need to track changes in public addresses.
With the development of this feature, Algorand further establishes itself as a leader in the field of decentralized finance. Powering several solutions in the blockchain Industry. What are your thoughts about Algorand, please drop them in the comment section.
For More information, check out this article by Liz Baran on Algorand’s Community Blog about Rekeying.
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