Bitcoin: what are public and private keys?

The crypto wallets that store Bitcoin and other cryptocurrencies come with a set of automatically generated keys, one public and one private.

The keys are created using cryptographya method of encrypting and decrypting information at the core of cryptocurrency technology such as Bitcoin and blockchain.

Public and private keys are very differentbut both are necessary to complete any cryptographic transaction involving, for example, Bitcoin.

The way you interact with your public and private keys will vary depending on the wallet type What do you use and if you choose self-custody of your crypto assets like Bitcoin.

One of the biggest differences between them is the security. Public keys can be shared securely with anyone you want, but private keys require careful custody or you risk losing funds.

This means that if you do self-custody, it’s important to have a plan in place to keep your private keys safe. One of the main purposes of cryptocurrencies like Bitcoin is to allow the exchange of value between peers without an intermediary such as a bank.

The cornerstone of security

But How can you trust sending money to a stranger on the other side of the world without an intermediary keeping everyone honest? Encrypted alphanumeric strings called “keys” make this possible and underpin the entire security apparatus for moving funds on the blockchain.

There is two types of cryptographic keys, public and private. Both serve different essential functions, and cryptocurrency transactions like Bitcoin of any kind would be virtually impossible without them.

How keys and cryptography work

Before we jump into public vs. private keys, let’s back up and talk about cryptography, which is at the heart of cryptocurrency technology like Bitcoin and blockchain.

Cryptography is a method of encrypting and decrypting information. so that it can be sent securely and only the intended recipient can read it. A message encrypted in cryptographic form would appear to be scrambled text to anyone else, but anyone with the corresponding decryption key could read it.

Blockchain transactions are encrypted and decrypted in the same way, by combining public and private cryptographic keys. Every new crypto wallet comes with a corresponding pair of cryptographically generated keys, one public and one private.

The public keys they can be shared securely with anyone trying to send crypto to your wallet. Private keys must be carefully protected, as anyone with a wallet’s private keys gains full control over the funds associated with them.

Use a recovery phrase, also known as a seed phrase, to back up the private key.

Depending on the type of wallet you use (custodial or non-custodial), you may never interact with your private keys. But you should be sure that they are used every time you buy, sell, trade or spend crypto, whether you know it or not.

Public Keys vs. Private Keys

Private keys and public keys perform very different functionsand both are necessary books to ensure that cryptographic transactions are carried out in a secure manner.

These keys usually take the form of long strings of alphanumeric characters They are cryptographically bound, which means that any transaction encrypted by a public key can only be decrypted using its corresponding private key. This encryption method is known as “asymmetric key cryptography.”

What is a public key?

A public key, as its name suggests, is visible to others. You can think of it like you Bank account. You can securely provide your public key to anyone who tries to send you funds, whether in an email signature, on a website, or in a social media post.

The only thing someone with your public key can do is send funds to your wallet, so sharing it does not present an immediate security risk. Public keys are actually generated mathematically from their corresponding private key, but the process is not reversible.

What is a private key?

Unlike public keys, your private key should never be shared with anyonesince whoever has the private key of a wallet can access the funds it contains.

If you are self-custodian, losing your private key could make your Bitcoin funds unrecoverable.

For users of cryptocurrencies like Bitcoin who are more concerned about the privacythis unwillingness to share private keys even extends to centralized exchanges, many of which provide custodial wallets that manage private keys on behalf of users.

The alternative side to escrow services is to use a self custody wallet in which you have full control of your private keys. The possession of private keys is a contentious issue in the world of cryptocurrencies like Bitcoin.

Many investors believe that you don’t actually “own” your crypto unless you are the sole holder of your private key. This point of view has given rise to the popular adage “neither your keys, nor your cryptography” in some crypto circles.

Does a backup of your wallet. Always remember to record your recovery phrase, also known as your seed phrase. This is the best way to protect your private key and keep your funds safe in case you lose access to your wallet.

What is the role of public and private keys during cryptographic transactions?

Regardless of the type of wallet you use, whether you have self-custody or use a custodial exchange walletall cryptographic transactions must be digitally “signed” with a private key to complete.

Once you initiate a transaction, your wallet builds the transaction that contains the destination address, the source address and the quantityin addition to other metadata.

Bitcoin is the most popular cryptocurrency in the world.

Your keys are used to create a digital signature confirming that the transaction is legitimate. Once the signed transaction is sent to the network, the nodes verify the signature and that the originating address has sufficient funds to complete the transaction.

In the case of custody portfolios, the exchange or service provider retains your keys and automatically signs transactions for you each time a request is made. Some cryptocurrency users prefer this setting as it reduces their liability: regaining access to a lost account is as easy as tapping “Forgot your password?”

However, this also means that an escrow service has the power to transact without your consent, restrict access to your assets, or even lose your funds to hacking, liquidation, or bankruptcy, as happened with the company. FTX.

The most security-conscious users of cryptocurrencies like Bitcoin prefer take banking into their own handsand opt instead for a non-custodial wallet, also known as self-custodial.

How should I protect my private keys?

If you use a service custody wallet, there is no safe way to protect your keys, since you do not control them. Only work with a company that you feel you can trust.

Do your homework and read about reputation and business practices from an exchange or wallet provider before allowing an institution to hold your funds.

Hardware wallets include key notation papers.

If you take care of yourself, losing your private key could make your funds unrecoverable. The best way to keep your private keys safe are the following:

• Never share your private keys with anyone (apart from trusted closest relatives).
• Use a recovery phrasealso known as a seed phrase, to back up the private key.
• Likewise, just share this recovery phrase with someone you wish to have access to your funds.
• Never take a screenshot of your private key or seed phrase, or any type of digital photo. If you have a large amount of cryptocurrencies like Bitcoin, it is always better to keep your private keys offline, as is the case with hardware wallets, which only connect to the Internet to sign transactions. A much less technical, but still very offline method is to simply write your recovery phrase on a piece of paper that you then hide or lock away. Just make sure no one else can find it except any designated relatives who can’t access the funds without it if something unexpected happens to you.

What is the difference between my private key and the seed phrase?

Private keys and seed phrases have a few things in common. For example, both must be protected with extreme cautionsince anyone who gets their hands on it will be able to copy a wallet or empty it of funds.

But that’s largely where the similarities end. Private keys are used to execute cryptographic transactions, while seed phrases are more fail-safe.

Every time a wallet generates a private key, it also creates a seed phrase, a single string usually 12 or 24 words which can be used to recover a crypto wallet.

If you lose your private key, your hardware wallet is lost or damaged, or you lose access to your wallet for any other reason, a seed phrase might be the only hope you have of getting your funds back.