One of the first steps of understanding cryptocurrency is learning what wallet addresses and public and private keys are. Making transactions will surely acquaint you with these crypto keys. But having a clear understanding of their concept will guarantee a safe trade and easy management of your crypto assets in the long run.
Not to worry! These keys aren’t as complex as they look! This lesson will guide you through using the three main tools and how deeply interconnected they are with one another.
However, let’s take a quick detour and talk about “cryptography” – the domain to which cryptocurrency owes its name.
The History of Cryptography
“Cryptography” is derived from the Greek word “kryptos,” which means “secret writing.” It’s the method of encrypting and decrypting information, keeping it confidential and preventing any unauthorized third parties from having access to the said information.
The field evolved over time and became a different branch of computer science. Its origins date back to academic research and military writing, which eventually extended its scope to the private domain.
The Significance of Using A Two-Key System
Basically, the two-key system can be explained as follows: public keys let you receive transactions; on the other hand, private keys are essential for sending transactions. Using a unique pair of cryptocurrency keys (a public and private key) is what we call asymmetric cryptography, one of a blockchain’s vital aspects. They are connected to each other in mathematical terms.
In essence, public keys have their origins in private keys. This connection makes unforgeable signatures that can only be affirmed by someone in the network who knows about the corresponding public key. Thus, ensuring only a certain party has permission to decrypt the data.
The Interconnected Relationship Between Crypto Keys and How They All Work Together
There are a lot of misconstrued perceptions surrounding crypto wallets, addresses, and keys. For more clarification on this topic, let’s take a good look at each of them, shall we?
An address is a set of letters and numbers generated in a random manner, representing a similar type of combination of a unique bank account number. The first Bitcoin address generated – Bitcoin genesis: 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa – sets an example.
The thing is, you can create an address for free within seconds, even without the presence of a third party. You’ve got the liberty of creating multiple public addresses as you like.
These public addresses can then be freely shared. That way, others can send digital currencies to your address.
Public Keys Vs Private Keys
The two keys that run the blockchain are called public keys and private keys.
A public key is similar to that of an account number. You can freely share it with everyone you want, and anyone can send transactions to it.
However, private keys are different. As the name suggests, a private key should be kept confidential. Think of it as a verification code or PIN, which, together with its equivalent public key, provides accessibility to the blockchain’s actual funds.
In any event, you should keep the access to your private key(s) safe and NEVER share it with anyone. Keeping them in paper or hardware wallets is the most secure way of storing them.
Take note, however, that you can keep them in an (encrypted) file, which you can then save and store offline.
A file with a database is the simplest example of a wallet. It contains your digital key(s) and address(es). You can store them offline and don’t have to have any association with the actual blockchain.
Think of crypto wallets as encrypted virtual keychains with all the crucial information necessary to access blockchain funds.
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