What is Private Key and Public Key in Blockchain?
A Private key and Public key are two important concepts in Bitcoin Blockchain. It’s recommended to have a good understanding of these two concepts if you plan to invest in Bitcoin..
Bitcoin Blockchain is an open database which is secured using private and public key cryptography. All your information is accessible to everyone but no one can tamper it unless they have legit keys. Private key management is everything in Bitcoin management and you must know its intricacies.
Private key and Public key in Bitcoin
Every person on Bitcoin network has two keys
The private key should be kept secret at all times. If you lose this key, someone may use it to secretly steal your money.
The public key which is known to everyone on Bitcoin network. Pubilc key has two uses. 1) It serves as your address on Bitcoin network 2) It is used to verify your digital signature.
Private and Public keys are linked together by an algorithm called Elliptical curve digital signature algorithm. It is not possible to derive your private key from the public key.
A private key is used to create your digital signature on the transaction. If Alice wants to send 5 bitcoins to Bob, she would digitally sign this transaction with her private key. She will address this transaction to Bob’s public key which acts as Bob’s address on the Bitcoin network. This transaction is then sent to Bitcoin network for verification. Bitcoin network will then use Alice’s public key to verify her signature. If Alice’s signature is valid, then the network will accept this transaction for further processing and transfer 5 bitcoins from Alice to Bob.
If you are using Bitcoin wallets such as Coinbase or Zebpay then your private keys are being managed by them. What you see on the wallet UI is your public key which can be used to receive Bitcoins from someone else. If you delete your account from the wallet, then you may lose your private key.
Things you should know about private keys
- Your account security depends on choosing a good private key
Private keys are meant to be kept secret. A private key is the only verification needed to spend funds from a Bitcoin address.
- Private keys are Portable
You can move your keys from one wallet to another.
- A Private Key is Just a Number
A Bitcoin private key is simply an integer between one and about 1077. Nobody can guess your private key from such a vast set. This vast keyspace plays a fundamental role in securing the Bitcoin network.
How to safely store private keys?
Hardware wallet or Paper Wallet is a safe way to store your private keys.
Online Wallets (also called Hot wallets) like Coinbase or Exchange wallets like Cex.io, Poloniex is never completely secure. You are not in control of your private key when you use above wallets for transactions. You will lose your private key if
- Your own PC gets hacked or cellphone gets stolen
- Wallet company gets hacked or goes bankrupt
- Wallet company turns rogue and runs away with your coins
- Software mistake in wallet leads to loss of coins
Cold storage (not fully connected online wallets) is the safest but a little inconvenient way of storing wallets.
If you want to store your completely secure then go for Hardware Wallets. They are hack proof. I have been using Ledger S Nano ( I since last couple of years and the experience has been wonderful. I suggest you invest a small amount if you plan long term investment in cryptocurrencies. Trezor is another good hardware wallet.
Paper wallets are nothing but a fancy way of storing your private keys on a paper.