Bitcoin - How do private and public keys work?
Bitcoin is a decentralized digital currency that uses cryptography to secure and verify transactions as well as to control the creation of new units of a particular cryptocurrency. One of the most important aspects of the technology behind Bitcoin is the use of private and public keys. In this blog post, we will explore how private and public keys work in the context of Bitcoin transactions.
What are private and public keys?
In the world of cryptography, a key is a piece of information that is used to encrypt and decrypt data. In the case of Bitcoin, a private key is a secret number that is used to authorize transactions. A public key, on the other hand, is a number that is used to identify a user's wallet.
How do private and public keys work together?
When a user wants to send bitcoins to another user, they use the recipient's public key to encrypt the transaction. The recipient can then use their private key to decrypt the transaction and access the bitcoins. This process is known as a digital signature and it ensures that only the owner of the private key can authorize the transaction.
The public key is derived from the private key through a process called a "one-way function". This means that it is almost impossible to reverse the process and determine the private key from the public key. As a result, the public key can be shared freely without compromising the security of the private key.
How are private and public keys generated?
Private and public keys are generated using a mathematical algorithm called the Elliptic Curve Digital Signature Algorithm (ECDSA). This algorithm takes a random number, known as a seed, and uses it to generate a unique private key. The corresponding public key is then derived from the private key through the use of the one-way function.
It's important to note that the private key must be kept secret at all times, as anyone who has access to it can authorize transactions from the corresponding wallet. On the other hand, the public key can be shared freely and is used to identify the wallet and receive transactions.
How to store private key?
The private key should be stored in a secure location, such as a hardware wallet or a paper wallet. A hardware wallet is a physical device that stores the private key offline, away from the reach of hackers. A paper wallet is a physical copy of the private key that can be stored in a safe place, such as a bank deposit box.
It's also possible to store private keys on a computer or mobile device, but this is not as secure as a hardware or paper wallet. If a computer or mobile device is compromised, the private key may be stolen by a hacker.
In conclusion, private and public keys are the backbone of the technology behind Bitcoin. They are used to secure and verify transactions, and to control the creation of new units of the cryptocurrency. Private keys must be kept secret at all times and should be stored in a secure location, while public keys can be shared freely and are used to identify a user's wallet. Understanding how private and public keys work is essential for anyone interested in using or investing in Bitcoin.