Crypto: Intro to Public & Private Keys
When it comes to the operation of Bitcoin, Ethereum, and other cryptocurrencies, public and private keys play a critical role; without them, networks could not be trusted as a secure decentralized immutable database.
A user’s public and private keys are generated when they create a cryptocurrency wallet. These keys are what allow users to send and receive cryptocurrency without the need of a third party to verify or facilitate the transaction.
Public Key
A public key is essentially a user’s receiving address; cryptographic code that is paired to a private key and used to generate an address to receive and store cryptocurrency. The public address that is generated from public keys can be shared freely with others. Multiple public keys can be associated with a single private key.
Private Key
A user’s private key protects their cryptocurrency assets. A private key proves ownership over a public key and grants access to the funds associated with the key and address.
A user’s private keys should not be shared with others. Sharing a private key with someone will grant them full access to the public key and its address, allowing them to send any and all funds on the wallet.
Note: While a public key can be recovered with a private key, it’s impossible to recover a private key using only the public key. If a user loses their private key, they will not be able to access the associated wallet or its funds. For this reason it’s always a good idea to properly back up and store a private key.
Keys in a Transaction
Public and Private keys are just one part of a larger cryptographic framework that comes into play when performing cryptocurrency transactions. A user’s public and private keys are used to sign and verify all transactions a user makes.
By using public and private keys, cryptocurrency networks can perform secure transactions and make reversing the process just about impossible.
Key Custodian
Depending on the type of wallet a user decides to store their cryptocurrency with, they may be trusting their keys to a third-party.
Non-custodial wallets give the user complete control of their keys (e.g. hardware wallets), while custodial wallets work where another party controls the wallets private keys (e.g. centralized exchanges).
Custodial wallets have become popular with many as it takes less responsibility to manage and, depending on the circumstance, can be more convenient by allowing you to trade and transact more seamlessly.
When choosing whether or not you want to be in control of your own keys, it depends largely on personal preference/circumstance. If you choose a custodial solution like an exchange, it is highly recommended to double check and make sure it’s a trusted and reputable company that places a high emphasis on security. When managing your own private keys, it is extremely crucial to back them up and store them some place (or even multiple places) securely.
