Satoshi’s love for cryptography was evident from the very beginning. The famous whitepaper was submitted to a cryptography forum where others basked in the glory of what was then a new, “peer-to-peer electronic cash system.” Judging by where bitcoin went from there, it’s clear to see that public-key cryptography, or the use of public and private keys as a means of security, plays a significant role in the security of transactions on the Bitcoin network. Without it, who knows where bitcoin would be right now?
What is public-key cryptography?
Public-key cryptography is a system that makes use of keys to secure the deliverance of messages or transactions. The security system makes use of three main tools, all deeply interconnected with one another. Let’s take a look at each of them.
The public keys are mainly used for dissemination. It’s a cryptographic code that allows users to receive messages, coins, or tokens. By sending these assets with a public key, they are converted into a different format—one that is unreadable by people who aren’t intended to be receivers (ones that don’t have the private key).
These keys often come in the form of long strings of alphanumeric characters. Here’s an example:
3048 0241 00C9 18FA CF8D EB2D EFD5 FD37 89B9 E069 EA97 FC20 5E35 F577 EE31 C4FB C6E4 4811 7D86 BC8F BAFA 362F 922B F01B 2F40 C744 2654 C0DD 2881 D673 CA2B 4003 C266 E2CD CB02 0301 0001
Confusing, right? That’s the point!
If public keys are used to encrypt messages and transactions, private keys are used to decrypt them. That way, only people who have the private key can decipher the message sent.
Private keys are vital to the security of your wallet, so make sure to keep them in a secure place. If you lose access to your private keys, there’s a good chance you’ll lose access to your cryptocurrency wallet (along with all the funds stored inside).
Private keys are also depicted as a string of alphanumeric characters, making it hard for hackers to crack. Here’s an example:
Here are a few tips on how you can safely store your bitcoin private keys:
- Store your private keys offline – Unfortunately, despite it being more convenient to have them connected to the Internet, leaving your wallets connected poses threats such as viruses, hackers, phishing scams, and other malware. Wallets such as paper wallets and hardware wallets store your private keys offline.
- Never share your private keys – Remember that whoever has access to your private keys also has access to your funds. If you don’t want anyone dipping into your holdings, then keep your private keys to yourself.
- Split your assets – Don’t put all your assets into one wallet, split them up and eliminate the risk of losing all your funds at once.
- Use secure passwords – Use random numbers, letters, and special characters in your password. Also, don’t use the same password multiple times on different websites. Remember, your password is the first line of defense. If hackers get through it easily, there’s no telling what else they can do.
- Keep all your devices up to date – Software updates often include added security protocols that further protect you from any possible threats.
- 2FA – 2FA acts as an extra layer of security that provides you with additional defense from any potential hackers.
- Back your wallets up – No matter how secure you think your wallet is, backing up your wallets can save you from future despair. There’s no such thing as being too safe when it comes to the protection of your money.
A wallet address, just like a home address, is a direction that leads directly to your cryptocurrency wallet. Each cryptocurrency wallet is assigned an address, which people can then use to receive funds.
Wallet addresses are essentially hashed versions of the public key. Public keys are compressed and shortened to make it easier to send an address.
A bitcoin wallet address can come in two forms: a long string of alphanumeric numbers, just like the others (e.g. 1BvBMSEYstWetqTFn5Au4m4GFg7xJaNVN2) or a QR code that can be scanned.
Their interconnected relationship and how they work together to protect you
Alongside their individual functions, these three aspects of public-key cryptography work hand-in-hand to secure your transactions.
For example, let’s say Rey wants to send BTC to Arthur. Rey would get Arthur’s wallet address and send it there. Once the transaction is sent, it is encrypted by the public key, only allowing Arthur to receive it as long as he has his corresponding private key. Arthur would then go into his wallet (using the private key) and receive the funds.
You can almost think of it as sending emails. Wallet addresses are your email addresses—anyone can send you emails if they have your email address. As soon as an email is sent to that address, it is encrypted (using a public key), only allowing the owner of that email address to access it. The receiver would then enter a password for the email (the private key) to read it.
These keys, once created, are mathematically paired together—private keys generate the public keys which, in turn, are compressed and shortened to form wallet addresses. Once a transaction is sent to a wallet address and is encrypted with a public key, you’ll need the corresponding private key to decrypt it.
Together, they work to keep your bitcoin wallet secured. They keep the digital ecosystem safe, and because of this kind of system, bitcoin transactions are some of the most secure transactions in the world.