The crypto industry is famous for its security and, at the same time, raises the doubts of many people. Which side did you land on? Despite possible risks and debates, it is gaining popularity very fast, becoming more usual for the youth generation. Let’s go to the roots to understand this industry better.
In this article, we’ll discuss public and private keys as core elements of crypto security. What’s the difference between public key vs private key? What are they, and why do they matter? How do they ensure safe transactions? Keep reading to learn.
Introduction to Basic Crypto Security
Cryptocurrency — a digital payment system that does not need banks to verify transactions and is controlled through a set of digital crypto keys and addresses representing ownership. It serves as a peer-to-peer method of exchange that can enable payments wherever and to anyone! How is it possible? Let’s figure it out.
Cryptocurrency got its name after cryptography, meaning ‘Hidden writing’ in Greek. Cryptography is a technique that verifies transactions and secures information from any third party during trading interactions on blockchains so that it can be sent securely and only read by the particular recipient.
Cryptography employs various techniques such as digital signatures and hash functions to verify and protect transactions on a blockchain. When a transaction is initiated, it is encrypted using a combination of private and public keys. This encryption transforms the transaction data into a seemingly nonsensical combination of characters, making it unreadable to anyone without the corresponding decryption key.
This way, cryptography ensures trustless transactions, which means there is no need to rely on third-party or ‘trust’ it. Encrypted data also makes blockchain transactions anonymous but at the same time secure, so you don’t need to know anything about a person to make transfers with them safely.
We highly recommend you read the article about other aspects that ensure blockchain security.
What are Public & Private Keys?
In general, a crypto key is a combination of characters: symbols, letters, or numbers. They are used within an encryption mechanism to alter data to appear random. Only the correct key can unlock the encrypted information. There are two types of encryption and decryption algorithms: private key cryptography and public key cryptography. How do they work in practice?
Once you start using crypto tokens or coins, you have to create a crypto wallet to manage crypto and transfers through the blockchain. Every crypto wallet has a corresponding pair of cryptographically generated combinations: public key and private key. Public keys can be safely shared with anybody attempting to send crypto to your wallet. Private keys should be carefully protected, as anyone with a wallet’s private keys gains total control over the funds associated with them.
A private key and a public key are usually forms of a lengthy combination of alphanumeric characters that are mathematically related, as the public key is derived from the private key. This relationship enables secure encryption and decryption processes in cryptocurrency transactions. Although they come in pairs and allow the transaction, they play different roles.
What is a Public Key?
Public-key cryptography, as you can guess from the name suggests, is viewable by other users. You may compare it with your checking account and routing numbers. You can safely provide your public key to anybody who tries to send you funds by email, website, or social media post. There is no risk in sharing your public key, as the only thing somebody with your public key will be able to do is to send funds to your crypto wallet and see its balance.
A public key is mathematically generated from its corresponding private key, and this process is not reversible.
The public key that can receive transactions is usually an address, which is a shortened form of your public key. It is important to clarify the distinction between a public key and an address. While the address is derived from the public key, it is not the same as the public key itself. The address serves as a shorter and more manageable representation of the public key, making it more user-friendly to interact with the cryptocurrency network.
What is a Private Key?
The core idea of the crypto private key is similar to a PIN number or password. A private key allows users to manage the crypto funds at a specific address. For this reason, in contrast to public keys, your private key should never be shared with anyone. Otherwise, anyone else can get access to your assets.
Private keys look like complex 256-character long binary code, and it’s large for a good reason. But users usually don’t see it. Many wallets use a ‘seed phrase’ also known as a ‘secret recovery phrase,’ QR code as a crypto wallet key that proves ownership of the storage, while the private key is hidden inside the software behind this user-friendly string of words.
Interesting to Know:
Centralized (CEX) and Decentralized (DEX) exchanges have different approaches to private data storage.
When you trade on CEX like a Binance, you use a custodian wallet, which means that the exchange platform holds your private key for you and has the ability to control your funds.
To use DEX is enough to connect your non-custodian to the platform. It means that DEX doesn’t store your private keys and is not responsible for your crypto assets.
Do you want to find out more about DEX and CEX differences?
Here is an informative article:
How to store your private key?
It is better to write it down and store it in several secret places, as there is no way to recover it. If you lose it or it gets into the wrong hands, you can lose your funds forever. Don’t take a screenshot of it or pictures on the phone because digital copies are vulnerable to hacker attacks.
How do Private Key & Public Key Work Together?
These keys are cryptographically tied, which means that each transaction encrypted by a public key can only be decrypted using its corresponding private key. This encryption method is famous as ‘asymmetric-key cryptography’.
Why is this important for secure cryptocurrency transactions?
All crypto transactions must be digitally ‘signed’ with a private key to be completed.
Once a user initiates a transfer, the wallet generates the transaction containing the ‘to address,’ ‘from address’ , and amount.
Your private keys are used to create a digital signature confirming the transaction is legitimate. Once the signed transaction is sent to the network, the nodes verify the signature and that the front address has enough funds to complete the transaction.
Private Key & Public Key Difference
At this point, let’s make a short private key vs public key comparison.
- Purpose: A public key is used to facilitate sending cryptocurrency into a wallet, while a private key to confirm the transaction.
- Security: There is no risk in sharing a public key, but a private key should be visible only to the wallet’s owner.
- Amount: One wallet can contain only one private key. At the same time, there could be multiple public keys associated with a particular private key.
Cryptography is a vital part of cryptocurrency that allows secure data exchange over the blockchain through encryption. We have discussed two primary elements of cryptography: private and public keys, which are regularly used in many interactions with crypto.
These two keys go and work together as a corresponding key pair. Despite their interdependence, they are different. The public key may be visible to anyone and is used to identify the sender and receiver of funds. The private key serves as a signature that allows transactions and may be known only by the fund’s owner. For this reason, users must take special care to secure private keys away from someone’s eyes.
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