To make it possible for users to freely make crypto transactions, it was necessary to develop special tools. They are called encryption keys and there are only two types – public (open) and private (closed). What is the difference between them and where do we use these keys? Let’s find out!
Why do Bitcoin transactions need encryption keys?
Crypto transactions involve a huge exchange of digital data, where the main part of assets (tokens) exists in the blockchain system in the form of data of uncompleted transactions. You can access them only with the help of special keys – public or private. They were created by developers to perform the following functions:
- confirmation of the crypto transfer and acceptance;
- ensuring the confidentiality of the data of the owner of the crypto wallet;
- protection of digital assets.
Both keys are tied to a crypto wallet and with their help a technical exchange of cryptocurrency is being made. Their main task is to secure both users and their crypto.
What is a public key?
The public or open key of a Bitcoin wallet is its address to which digital money is transferred. We can compare it with a login. Other users of the system can freely see your key, which is why it is called public. With its help, a transaction is created – a digital request for the transfer of funds. In the wallet, you can generate an unlimited number of public keys and each will have its own private key.
What is a private key?
Any cryptocurrency transaction must be approved by the administrators of the network. They have the right to cancel it if they detect the absence of a digital signature. It is created with the help of a private key. The private key of a Bitcoin wallet is a unique code that allows users to manage their account. This is something like a password, a set of characters, without which it is impossible to make transfers between crypto-accounts. Technically, this is a 256-bit number randomly generated by the program when a user creates an account in a wallet.
The Bitcoin private key is encoded in Base64, MINI, Hex, WIF. Private keys are stored in a special file, and this information should not concern third parties, while information about public keys is available to the public.
How to get a private key?
Private keys are generated automatically in Bitcoin wallets when the owner is registered. Depending on the type of wallet, the user will have certain rights to access key management. About how to create a crypto wallet you can read in this article.
Types of crypto wallets:
- Desktop Wallets
Applications that are installed on stationary or mobile devices. They are considered more energy-intensive, but also more secure, since when they are installed, the entire Bitcoin blockchain is downloaded, which minimizes access to third-party unverified servers. A convenient option for those who are used to working with cryptocurrency from their computer or laptop.
Examples: Jaxx, Atomic Wallet, Electrum, Coinomi, Exodus.
- Web Wallets
Specialized sites for storing tokens. Registration requires an e-mail and a password. Access to private keys on some of these sites is provided to the user immediately when creating a wallet.
Examples: Blockchain.com, Guarda, Metamask, Coinbase Wallet.
- Mobile Wallets
These are mobile applications for Android and iOS that are non-custodial in nature, that is, they give the user full control over wallets and digital assets.
Examples: Trust Wallet, imToken, Token Pocket
- Hardware Wallets
Considered to be the safest way of storing crypto assets. The owner of such a wallet gets access to all private keys and full control over them. Theft of protected data is impossible.
Examples: Ledger, Trezor, Keepkey, Safepal hardware devices
- Paper Wallets
Some services generate private keys and allow users to save and print them.
- Storage of crypto assets on crypto exchanges
In this case, it is not the user who owns all the private keys, but the exchange.
Differences between private and public Bitcoin encryption keys
- The public key is available to everyone, and the private key can see only the owner of the wallet;
- The public key encrypts the message, the private key decrypts it;
- The public key starts the transaction and the private allows it to be completed;
- The public key contains less data than the private one.
When working with transactions, the simultaneous use of these two keys is necessary.
Public and private cryptocurrency encryption keys cannot exist without each other. Basically, a cryptocurrency wallet is a private encryption key from which a public one is generated. Scammers are constantly hunting for private keys, pretending to be developers or exchange employees. But it is important to remember that real employees will never ask you to provide them with confidential owner information. We talked about the different types of crypto scams in our blog, and gave a couple of tips on how to avoid them.