1min read
Published on: Jan 16, 2024
#Glossary
In Crypto wallets, there are two vital keys:
Public keys and private keys are essential belongings of a crypto wallet, and they are created by a cryptographic code which makes use of asymmetric-key encryption algorithms.
Both keys are generated automatically when opening a new crypto wallet. This means that any user who signs up for a crypto wallet will be given a public key and a private key. However, this depends on the type of wallet you are signing up for.
Most centralised crypto wallets give you your public key, which acts as your public address while keeping your private keys for you. Although you might never have to interact with your private key, you should know that your private key is being used anytime you buy, sell, swap or transfer your crypto.
On the other hand, self-custody, or decentralised crypto wallets, give you both your public and private keys.
Both public and private keys in crypto play essential roles in transactions, and this is why it is vital to keep them safe.
Your public keys can be shared with anyone because they act as a public address where a sender can send you your cryptocurrency. Public keys are similar to your traditional bank account number, which can be shared easily with anyone to receive your funds.
However, private keys act as your bank account password, which should be kept safe and not shared with anyone to avoid the risk of losing funds.
This means if you use a self-custody crypto wallet, it is essential your private keys are kept in a very safe place that only you or a trusted next of kin can access.
Recommended Read: Understanding Crypto Custody Solutions
Public keys are cryptographically generated from their private key, but a private key cannot be generated from its corresponding public key.
This means that when you open a new crypto wallet, your public key, your unique personal address with a string of letters and numbers, usually within 26 to 34 characters, is given to you.
Your public key is a shortened version of your private key, and can easily be generated back from your private key if misplaced or forgotten However, your private key is a much longer cryptographic code which, when forgotten, cannot be regenerated from your public key.
Crypto wallets are built on a cryptographic system that uses two different keys to function. These keys are generated uniquely for each crypto wallet.
These keys are important because they prove that a transaction done in a given wallet was willfully signed by its owner and not by somebody else.
Signing the transaction with a private key is mandatory for any crypto user to be able to send crypto from a wallet to another.
This works like sending money from your fiat bank account to another account: you would need your bank account password or PIN for the transaction.
The term Public-key cryptography (PKC) is associated with crypto wallet keys. PKC is a cryptographic technology first designed for the encryption and decryption of information in traditional computing.
Today, PKC is not only used to encrypt and decrypt crypto transactions, but it also helps in validating the authenticity of a given data on the blockchain by making use of asymmetric encryption.
What makes PKC unique is its trapdoor functions. Trapdoor functions are one-way mathematical functions that are only solved in a certain way and can’t be reversed at all.
This means that with PKC, transactions made on the blockchain can be quickly done, but they can’t be reversed back.
The primary purpose of PKC in crypto wallets is to ensure that any crypto transaction made by the wallet owner is secure and private. Also, PKC shows proof that the owner of the funds willfully signed a transaction.
Read More: How to Secure Your Crypto Wallets Against Hacks
To sum it up, cryptocurrency wallets can make transactions safe and secure, thanks to both private and public keys.
It is important to know that anyone can see your public key when you make any transaction with your crypto wallet . However, it is always recommended to stay careful as your private keys can’t be seen by anyone else except you.
This article is for informational purposes only and not intended as investment or financial advice. It contains opinions and speculations that are subject to change without notice.
The author and publisher disclaim any liability for decisions made based on the content of this article. Readers are advised to conduct their own research and consult a financial advisor before making investment decisions.
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