What are Public and Private Keys?

The concepts of public and private key cryptography underpin Bitcoin’s security and help maintain the integrity of all transactions on the base ledger. As such, it's crucial we have a deep understanding of these types of keys if we are ever to hold or send any Bitcoin ourselves.

What is a Private Key?

A private key in the context of Bitcoin is a sophisticated form of cryptography that allows a user to access their bitcoin. It is a randomly generated number that serves as a secret password, granting the holder the ability to send bitcoin from their own wallet.

Without the private key, you cannot access or control your bitcoin. Think of it as the key to a safety deposit box—without it, the contents of the box remain completely inaccessible. The term "Private Key" refers to this critical component that secures your Bitcoin holdings.

What is a Public Key?

A public key, on the other hand, is derived from the private key itself, and acts as an address to which bitcoin can be sent. Unlike the private key, the public key is shared openly for the entire world to see.

When you want to receive bitcoin, you provide your public key to the sender. This key ensures that the bitcoin is directed to your specific wallet.

The relationship between the public and private keys is akin to an email address and its password; the public key (email address) is shared openly, while the private key (password) remains confidential.

How a Public key is derived from Private key

Source: Cheapsslsecurity

‍

How Does it Relate to Cryptography?

Cryptography is the science of securing communication and information through the use of codes. In Bitcoin, cryptography ensures that only the owner of a private key can send the associated bitcoin, preventing unauthorized transactions.

The structure of public and private key Bitcoin uses are part of a cryptographic system called asymmetric encryption. This system uses a pair of keys—a public key to encrypt the transaction and a private key to decrypt it—ensuring secure and verifiable transactions.

Asymmetric Encryption

Source: AppviewX

Why Do I Need to Keep it Secure?

The security of your private key is paramount. If someone gains access to your private key, they can control your bitcoin, potentially leading to theft.

Unlike traditional banking systems, Bitcoin transactions are irreversible, and there is no central authority to recover lost funds. Hence, safeguarding your private key is crucial to protecting your bitcoin holdings.

Top 3 Hacks of 2023 by Type

Source: Coinmonks

‍

How to Keep My Private Key Secure?

There are several methods to keep your private key secure, each with varying levels of security and convenience. Here are some examples:

1. Hardware Wallets: These are physical devices that store your private key and bitcoin offline. Examples include Coldcard and Bitkey. Hardware wallets are considered highly secure because they are immune to online hacking attempts. They often require a PIN or password, adding an extra layer of protection.
2. Paper Wallets (not recommended): This method involves printing your private key on a piece of paper and storing it in a secure location. While this method is also offline and immune to hacking, it carries the risk of physical damage or loss. Ensuring the paper is stored in a fireproof and waterproof safe can mitigate these risks.
3. Software Wallets: These are applications or software programs that store your private key. Examples include mobile apps like Phoenix Wallet or Zeus and desktop programs like Electrum or Specter. While convenient, software wallets are more vulnerable to online threats like malware and phishing attacks. It's crucial to use strong passwords and enable two-factor authentication where possible.
4. Brain Wallets (not recommended): This method involves memorizing a string of 12 or 24 words that generates your private key. While it eliminates physical and digital risks, it requires a strong and memorable passphrase. Forgetting the passphrase means losing access to your private key, bitcoin, and funds forever, therefore, it is only recommended to use it for short periods.

Cold vs Hot Wallet

When discussing Bitcoin security, the terms "cold wallet" and "hot wallet" often come up. Understanding the difference between these two is vital for managing your bitcoin securely.

• Cold Wallet: A cold wallet stores your private key offline, making it immune to online threats. Hardware wallets and paper wallets are examples of cold wallets.

They are ideal for long-term storage and large amounts of bitcoin. The primary advantage is security, as they are not connected to the internet and thus not susceptible to hacking.

The downside is that they are usually more costly to implement and more difficult and time consuming to navigate and utilize.

• Hot Wallet: A hot wallet is connected to the internet and used for daily transactions. Examples include mobile apps and online wallets like those offered by exchanges.

While convenient for frequent transactions, hot wallets are more vulnerable to hacking. It's crucial to use them only for small amounts of bitcoin and enable robust security measures.

Hot vs Cold Wallets

Source: Phemex

‍

In conclusion, understanding the system of public and private keys Bitcoin employs is fundamental for anyone involved in this space.

The private key is your gateway to accessing and controlling your bitcoin, while the public key allows you to receive it. Cryptography ensures the security of transactions, and safeguarding your private key is essential to protecting your assets.

By choosing the appropriate storage method, whether a cold wallet or a hot wallet, you can secure your bitcoin effectively and navigate this digital frontier with confidence.

‍