Understanding Private and Public Keys
Private vs Public Keys: A Simple Guide
Imagine a safe deposit box at a bank. To access your box, you need two things: a key to open it and an address (usually a unique number) to locate it within the bank’s vault.
In the world of blockchain and cryptocurrency, private and public keys work in a similar way to keep your digital assets secure and accessible.
What Are Private and Public Keys?
Public Key: Public key is the address that holds your
crypto on the blockchain. This address contains your crypto balance and other
information like both incoming and outgoing transactions, transaction dates and
time and a record of how the balances have changed over time. This address can be shared with anyone.
Think of your public key like your email address. You can
share your email address with anyone so they can send you messages, just as you
can share your public key with others so they can send you cryptocurrency. The
public key is visible to everyone and helps others find and send funds to you.
Private Key: Your private key is the only key that is
used to authorize and sign a transaction. You should not share this key with
anyone because anyone with access to it can control your funds.
Your private key is like your email password. It’s something
only you should know. Just as your email password allows you to access your
account and read your messages, your private key allows you to access and
manage the cryptocurrency stored in your digital wallet.
Other Analogies to Understand Both Private and Public Keys
Public Key: Your home address. It lets people know where to find your house.
Private Key: Your house key. It’s the only thing that lets you enter your house and access your personal belongings.
Private Key: Bank Account PIN. You keep this secret and use it to manage and control your account.
How Private and Public Keys Work in a Cryptocurrency Payment
Before going further, do not get confused with public key
and public address, public address is the short form for the public key.
Let’s say Bob wants to send Bitcoin to his friend Joe. To do this, Bob needs Joe’s public address which functions like a bank account number for receiving Bitcoin. Once Bob has Joe’s public address, he inputs it into his crypto wallet along with the amount of Bitcoin he wants to send.
When Bob clicks the "Confirm Transaction" button in his crypto wallet, his wallet uses his private key to sign and authorize the transaction. Once the transaction is signed, the Bitcoin is transferred from Bob’s public address to Joe’s public address on the Bitcoin blockchain, after passing all necessary checks.
This means that Joe now holds the Bitcoin Bob sent, and Bob’s balance is updated to reflect the new amount of Bitcoin left in his public address. Joe can only spend or move the Bitcoin he received using his private key.
Nice! Now you have a good understanding about how private and public key differ and how they are been utilized in the blockchain technology in the context of digital payments. I’ll continue to keep things simple and easy to understand.
How Private Keys Are Created
Private keys are generated from a "seed phrase," which is a series of random words. When you download a crypto software wallet to your mobile or laptop, the first thing you need to do is set up your private key.
The wallet will guide you through this process by generating and providing
you with 12 or 24 random words—this is the seed phrase, also known as the
recovery phrase. Your responsibility is to write these words down in the exact
order and spelling and store them in a safe place.
Once you've verified that you have recorded the seed phrase
correctly, the wallet will use it to automatically generate one or more private
keys, depending on how many cryptocurrencies you are managing in that wallet.
The software handles which private key is used for which transaction, so you
don't have to worry about that.
Your main job is to securely store your seed phrase, as it is the only way to recover your wallet if you accidentally delete the crypto wallet or if something happens to your computer or mobile. While protecting your seed phrase is crucial, you'll also need to safeguard your private keys. We'll cover how to keep your private keys safe in a future blog.
I recommend writing your seed phrase in a book where many
other things are written, this is a clever way to keep your seed phrase hidden.
Never ever store your recovery phrase in any digital form. If it is digital, it
is highly vulnerable to hacking and theft.
How Public Keys Are Created
A public key is created using a private key, and that’s the core idea! There’s a mathematical link between the two. One private key generates only one public key, but that public key can create multiple public addresses. A public address is essentially a shorter version of the public key, like a nickname.
Public keys are long and contain many characters, which can make them difficult to manage. To make things easier, developers created public addresses from public keys, allowing us to use shorter, simpler addresses when sending or receiving cryptocurrency.
Example:
Public Key: 038a7e5e2f2a295b5d7f1cfb80c14578f6a897e563f05253ec64e377fe7a4e7a7c4
Public Address: 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa
You might wonder if hackers can figure out the private key from the public key since public keys are always exposed. The answer is no—it’s not possible.
This process only works in one direction: the public key is created from the private key using complex mathematical functions, but you can't reverse it to find the private key from the public key.
Think of it like blending different fruits to make a smoothie. Once the fruits are blended, there's no way to separate them back into their original form. Similarly, it's impossible to reverse the process of deriving a public key from a private key.
While it's easy to generate a public key from a private key, there's no way to use the public key to figure out the private key. This is why you can safely share your public key, but your private key must always be kept secure.
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The Uniqueness of Private and public keys
The uniqueness of a private key is similar to DNA. Just as every person has a unique DNA sequence (except for identical twins), every private key is also one-of-a-kind, thanks to the complex algorithms used to generate them. It’s almost impossible for two private keys to be identical.
Public keys, which are derived from private keys, are like fingerprints—unique
to each individual and closely linked to their private key. Similarly, public
addresses generated from public keys are also unique. No two people with
different public keys will ever share the same public address, ensuring that
each address is specific to the owner.
Conclusion
Your seed phrase is the most important part of your wallet and keeping it in a safe place should be your top priority. Your seed phrase generates unique private keys, which then create unique public keys, these public keys then create public addresses for receiving cryptocurrency on different blockchains like Bitcoin, Ethereum, XRP, and more.
All of these, from
the seed phrase to the public address, are unique due to the advanced
algorithms used, ensuring no duplicates have ever been created in the world of
blockchain and digital currency.
In a future blog, we’ll also cover how to keep your private keys
safe. For now, I believe you’ve got a solid foundation - just remember to keep your seed
phrase safe!
Disclaimer: The contents of this article are for informational purposes only and are not financial advice. The views here are just the author’s opinions. The crypto market is volatile, so be sure to do your own research before investing.
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