Cryptocurrencies such as Bitcoin operate on a technology called blockchain. A key aspect of this technology is the use of private and public keys. Understanding how these keys work is essential to understanding how cryptocurrencies work.
To begin with, every cryptocurrency user has a pair of keys: a private key and a public key. These keys are long, complex sequences of numbers and letters, generated by cryptographic algorithms. The private key is kept secret by the user, while the public key is shared with the network.
What are private keys?
The private key is a unique sequence of numbers and letters that is kept secret by the owner of the cryptocurrency. This key is used to sign transactions, proving that the user has the authority to spend the funds associated with the corresponding public key.
When you own cryptocurrency, what you really own is a private key that can unlock a certain amount of currency. Without this private key, the coin is inaccessible. Therefore, it is extremely important to protect the private key and keep it secure. If you lose the private key, you will lose access to your cryptocurrency. If someone gets your private key, they can spend your cryptocurrency.
What are public keys?
The public key is a string of numbers and letters that is shared with the cryptocurrency network. This key is used to receive transactions. When someone wants to send you cryptocurrency, they send it to your public key.
The public key is derived from the private key through a complex mathematical process. However, the process cannot be reversed. In other words, even if someone has your public key, they cannot determine your private key. This is what makes the system secure.
How private and public keys work together
When you send cryptocurrencies, you "sign" the transaction with your private key. This signature proves that you have the authority to spend the funds. The transaction is then broadcast to the network, where miners verify the signature using the corresponding public key. If the signature is verified, the transaction will be included in the blockchain and the funds will be transferred.
This system of private and public keys is what allows the blockchain to function without the need for a central authority. Each user has full control over their own funds, but all transactions are transparent and can be verified by anyone on the network.
Advanced: Cryptocurrency Addresses
To make things a little more complicated, most cryptocurrencies do not use the public key directly. Instead, they use something called a cryptocurrency address. A cryptocurrency address is essentially a hashed version of the public key.
Hashing is a process that takes an input of any size and produces a fixed-size output. In the case of a cryptocurrency address, the input is the public key and the output is a fixed-length sequence of numbers and letters.
Using cryptocurrency addresses adds an extra layer of security. Even if someone has your cryptocurrency address, they cannot determine your public or private key. Furthermore, cryptocurrency addresses are shorter and easier to use than public keys.
In short, private and public keys are fundamental to how cryptocurrencies work. The private key allows you to spend your funds, while the public key allows others to send you funds. Together, they allow the blockchain to function in a decentralized and secure way.
