Difference Between a Cryptocurrency
Public Key and Private Key for Beginners
As the mainstream starts to adopt cryptocurrencies more and more, terms that were once firmly in the realm of ‘crypto enthusiasts’ have become increasingly important to the wider public investing in cryptocurrency. Before you start investing, it’s wise to understand what ‘public keys’ and ‘private keys’ are, as for any cryptocurrency transaction, a private key and a public key are both essential.
Each key has its own function and both are essential to manage a transaction with one being kept private and one is visible publicly that can be shared with others. The main importance of these keys is that they help authenticate transactions and the authenticity or identity of another cryptocurrency users wallet.
The key pairs are derived from the field of cryptography known as Public Key Cryptography (PKC) or Asymmetric Encryption. Public Key Cryptography only allows a transition from one state to another with no way to go reverse the process.
What is a Private Key?
A private key is a unique set of letters and numbers that help authenticate the owner or user of a crypto wallet. Similar to your online banking password, a private key must be kept a secret to ensure the security of the coins in your wallet.
Digital wallets generally store private keys as they help transfer cryptocurrencies. Using the private key, users can authenticate transactions. With just one private key, multiple public keys can be created.
What is a Public Key?
When you own a digital wallet, a cryptocurrency address is created that can be shared with other people to send you cryptocoins; similar to your physical or email address, when you share it with others they can send you mail or email.
Blockchain operates on a protocol based on the concept of asymmetric encryption; in short this means a public key can be traced to a private key but cannot decode it. This means that using the public key, some parts of the encrypted data in the transaction can be accessed, whereas the remaining sections can only be accessed with the help of a private key.
The public key is derived from the private key. But you cannot derive a private key from the public key as this is a one-way encryption.
How Does a Cryptocurrency Transaction Work?
For a transaction to take place between two parties, one of them provides their public wallet address and the other party sends the digital currency to the address which is then authenticated with their private key.
In cryptocurrency transactions, only one level of a unique identifier is required for authentication. The public key can be traced back to the transactions, making it impossible to forge or falsify cryptocurrency transactions. The public/private key pairs provide proof of work that helps to validate transactions.
Summary
To make a cryptocurrency transaction both private and public keys are necessary; both have their own function and although the public key is derived from the private key, you cannot use the public key to trace back to the private key.
