In a very conceptual sense, a key is a property right or an object that opens something. To give a simple example:
There is a car owner and the car has a key. This gives the owner of the key the right of access to the car and demonstrates that they are the owner of that car, at least theoretically. If the owner of the vehicle loses that key, they can take their spare key (backup key) and use it.
This concept applies to the keys that will be discussed in this article. Bitcoin is built on public key, a cryptographic system that uses key pairs, and private keys that are kept secret and used for authentication and encryption. Simply put, when a transaction is executed, a digital verification is needed that entitles the holder to those coins.
What Are Public and Private Keys?
All cryptographic systems are based on the concept of a key. A key is the basis for converting, usually mathematically, an ordinary message into an unreadable message. Most cryptographic systems have been based on private key cryptography.
What Is a Private Key?
A private key is a kind of ‘password’ that allows you to sign transactions and send bitcoins to anyone. Thus, it is the only information needed to access and use your funds. In addition, it also protects your account from access by others. Thus, this is the most valuable information for a bitcoin user and it is what you need to protect so that you and no one else can access your money.
A private key consists of 78 random numbers, or 256 bits in computer language. A private key can be represented in various forms, such as: 256-character binary code, 64-digit hexadecimal code, QR code, mnemonic phrase. Bitcoin uses the basic laws of probability to ensure that each person generates a unique number each time a key is created.
You should NEVER, under any circumstances, share your secret key with anyone else. It is best to keep them as safe as possible.
What Is a Public Key?
A public bitcoin key consists of an extremely long chain of numbers, so it is compressed and shortened to form a public address, which is like a bank account number. When two people reach an agreement in which one of them sends their bitcoins or other cryptocurrencies, they reveal their public addresses. A public address is a shortened version of a public key, and users can create as many public addresses as they want to receive bitcoins.
The Difference Between Public and Private Keys
A public key can be regarded as a mailing address. It is open and can be distributed in any way. Public keys can be shared with everyone in the system. When the sender receives the public key, he uses it to encrypt his message.
Actually, the public key and the private key are not really keys, but mathematically linked to large prime numbers. The link in this case says that whatever is encrypted with the public key can only be decrypted with the associated private key.
With only the public key, no one can guess the private key. As a consequence, the public key can be freely transmitted. At the same time, the private key is the property of only one person.
In the cryptocurrency world, either party can send encrypted information using the public address associated with the user’s private key. This is proof that the transaction transmitted was indeed signed by the owner of the funds and has not been tampered with. All of this happens on a public blockchain network between peer-to-peer nodes.
While cryptocurrency public and private keys are different, there is a close relationship between them. For this reason, they are united by 3 important rules of operation.
- Multiple public keys (or receive addresses) can be generated from a single cryptocurrency private key.
- Only the owner of the corresponding private key can access information sent to public addresses.
- If the user has a private key, it is always possible to restore the public key. At the same time, it is impossible to find the private key using only the public key. As a result, if the private key is lost, the user may lose his funds forever. The user will also be unable to transfer the coins stored in the wallet. Accordingly, if the user does not own his private key, he does not own his cryptocurrency. It is important to protect your private keys.
How to Use Bitcoin Private Key?
Public key cryptography has two main uses: identification and confidentiality. In a nutshell, it can be described like this:
- The sender receives a public key from the recipient.
- The sender uses that key to encrypt the information.
- The sender sends the encrypted information to the receiver.
- The receiver uses his/her private key to decrypt the information.
When we talk about cryptocurrencies, the private key is something you physically own. It gives you the right to manage your digital assets and authorize any transaction. Whoever knows this key can spend the corresponding funds.
Where to Store Private Keys?
There are many ways to securely store private keys. The most common is the use of cryptocurrency wallets.
These are tools that provide a link to the blockchain network. Unlike the traditional wallets that people use in everyday life, cryptocurrency wallets do not store bank cards or fiat currencies. Instead, they store private keys. In reality, users’ funds are part of the blockchain in the form of pieces of data, and wallets allow them to be accessed. Using their cryptocurrency wallet, users can generate various public keys or addresses that allow them to receive payments.
There are 2 main types of cryptocurrency wallets—hot and cold wallets. While they perform the same function, they do not provide the same level of security. Choosing a cryptocurrency wallet carefully is very important.
Owners can store their private keys online in a cryptocurrency wallet, which is one of the easiest storage options but require internet connectivity. Such wallets can usually be used in both mobile, desktop, or web versions. These wallets are known as ‘hot wallets’ because they store private keys online.
Additionally, owners can store keys on their devices that do not require a network connection. Such storage is called a ‘cold wallet.’ It can be a piece of paper with the key written on it, or a stored private key on a personal computer. Although this method gives a greater guarantee of the security of private keys, there are other risks associated with the loss of a private key.
As mentioned above, there are various storage options for your private keys. In this article, we recommend using the Guarda wallet—a hot wallet that is also non-custodial. Guarda Wallet forms a reliable and secure ecosystem for blockchain-based transactions. The wallet is open-source and easy to use. In addition, Guarda does not store information about users and has no access to their funds.
Users control their private keys themselves, only the user has access to them. This makes it an ideal wallet for bitcoin and other crypto assets.