Secure asymmetric cryptography algorithms guarantee cryptocurrency security. You need a private key for crypto transaction signing and a public key is required for verifying a private key. Both are cryptocurrency addresses of the sender of the transaction.
Proper private key management, ensuring its security, safety, and secrecy is a main priority for every crypto owner. As private keys provide access to the blockchain addresses where all crypto assets are stored and give the possibility to conduct transactions with those assets.
What is a private key and why do we need it?
To put it simply: а private key is a randomly generated sequence of numbers. It allows you to access and manage your crypto assets.
A private key provides crypto wallet owners access to coins and tokens. Crypto management is only possible with a private key. A private key should be kept strictly confidential and should be disclosed to third parties or stored in unsecured places. It is also not recommended to store a private key in centralized crypto exchanges, hot wallets as they are permanently connected to the Internet.
It is used to digitally sign outgoing transactions. Each private key is linked to one or more public keys, also known as addresses. Before your transaction is sent to the blockchain, you sign it with a private key meant to create a digital signature. Nodes in the network also use a public key to verify the authenticity of a digital signature, as these keys are linked by a mathematical algorithm. A private key remains secret to everyone, including validators.
What is a public key, how is it related to a private key and why do we need it?
To put it simply: a public key is a numerical sequence generated from a private key based on a complex mathematical algorithm. It verifies transactions legitimacy and publicly available, that’s why it is called public.
Important: You can generate public keys having private keys. However, it is impossible to derive a private key from a public key, as the algorithm calculating the public key works only one way.
So, data transfer process in blockchain can be described in 3 steps:
- Keys generation (public and private)
- Transaction digital signature
- Data encryption/decryption
Private and public key: a comparison table based on Bitcoin blockchain