People don’t purchase cryptocurrency because they’re convinced it will become a dominant form in global payments or transform business and society but because they want to earn some cash. It’s very easy to get started investing (think spending as little as $1). If you choose to own cryptocurrencies, there are countless coins to choose from. Ethereum, for instance, has a market cap of roughly $223 billion, and its network is aimed at smart contracts and decentralized applications, not to mention Web3 applications and NFTs. You can buy Ethereum with credit card through an exchange using any national currency. Protect your Ethereum from potential threats by storing it in a wallet outside the exchange.
A cryptocurrency wallet generates a public/private set of keys for you to manage your funds. They’re created using cryptography, which allows only the sender and the intended recipient of the message to view its contents. Cryptography is the core foundation for blockchain technology, used to protect user privacy and transaction information. It also helps ensure data consistency. Public and private keys are vital components of Ethereum and other cryptocurrencies, allowing you to send and receive coins without the need for a third party to verify the transactions. Continue reading to find out everything you need to know about public and private keys.
What Is a Public Key?
The public key allows you to receive cryptocurrency transactions, so it’s viewable by others. You can share the public key with anyone attempting to send you funds via email, a website, or social media. It’s similar to providing your account number: you can share the information with everyone, but it doesn’t allow them to withdraw money or log into your account. If someone sends you Ethereum, you’ll need the private key to unlock the transaction and prove you’re the owner of the tokens. But enough about that for now. The public key takes the form of an address; it’s mathematically generated from the corresponding private key.
Due to the fact that the public key comprises a great many numbers, it’s compressed and shortened. The sender needs the public address to send cryptocurrency. In case you didn’t know, you can check the sender’s batch of coins using their public key, which will be displayed on your screen. As a way of illustration, think about donation pages for charities. Anyone can contribute to the sum, but no one can get hold of the donated funds. There’s no need to worry if you lose your private key because you can regenerate it using the private key. The opposite doesn’t work.
What Is a Private Key?
The private key allows you to send cryptocurrency transactions and access the funds the wallet accommodates. As mentioned earlier, the public key has its roots in the private key, and it’s precisely this connection that makes it possible for you to create forge-proof signatures that can be validated only by other network participants who have knowledge of the public key. It goes without saying that you mustn’t share your private key with anyone; otherwise, someone can take control of your crypto holdings and use them as they please. One of the benefits of being a private person is you don’t have to worry about losing your coins.
Before a transaction is broadcast to the blockchain network, a signature is used to verify that the sender has access to the private key associated with the wallet address. The public key is used to demonstrate that the signature came from the private key. If you lose your private key, any Ethereum located at that address will be gone forever, as it’s impossible to restore the private key from the public key. It can be a nightmare scenario for any wallet owner – you can’t import or restore the wallet onto new devices.
There are several types of private keys to take note of, such as:
- QR codes
- 256-character binary codes
- Mnemonic phrases
- 64-digit hexadecimal codes
No matter what shape it takes, the private key is a significantly larger number than those used in everyday life. You can have several public keys connected to the private key. The most straightforward way to keep safe is to use a digital wallet to manage your private key. Go with a wallet provider from a company with outstanding past performances. If you have a self-custody cryptocurrency wallet, it’s recommended to keep your private key somewhere that’s not connected to the Internet. For example, it can be written on a piece of paper.
The Public and Private Keys Control Your Cryptocurrency
Regardless of the type of cryptocurrency wallet you use, whether it’s a custodial exchange wallet or a self-custody wallet, all transactions must be digitally signed with a private key to be valid. Your public key is like your address, and your private key is like your password. Due to cryptography, you can communicate with people you do or don’t know by enabling them to identify you and encrypting your communications. Since you’re using separate keys, it’s asymmetric encryption. The keys are separate but mathematically related to one another. Asymmetric encryption protects you from man-in-the-middle attacks, data leaks, and data theft.
Attention must be paid to the fact that private keys and seed phrases aren’t the same thing, even if both must be protected with extreme caution. The private key grants access to any wallet on the blockchain, while the seed phrase gives access to just one crypto address. The seed phrase is a derivative of your wallet and acts as a master key for your account(s). In case you lose your private key, the seed phrase is the only thing that can help you retrieve your funds. Having this phrase means you’re still able to access your crypto assets.
All in all, no encryption method is perfect, and this includes public and private keys. The loss of one can lead to dismal consequences. If you prioritize speed and data protection, symmetric encryption is beneficial because the data is scrambled, so it can’t be understood by anyone who doesn’t possess the key. One key is used to encrypt and decrypt data.