The Keys to Cryptocurrency
- Shae Biron
- May 12, 2022
- 2 min read
Updated: Jun 30, 2022
Public and private keys are what allow cryptocurrency users to access their holdings. When you start to engage in crypto trading, you are issued two keys:
A Public Key - this key is used as the public-facing address, similar to an email address. It's the destination where funds are sent and received and you can share this key with other users for that purpose.
A Private Key - this key is like a password that unlocks your virtual vault that holds your funds and allows you to access them (this is not to be shared with anyone).
A public key is also used to encrypt a message or check the legitimacy of a digital signature, while private keys are used to decrypt messages that were created with the corresponding public key or to create signatures. In other words, a public key locks up data from unauthorized use and a private key is used to unlock it.
How Does a Public Key Work?
The two main types of cryptographic algorithms are symmetric and asymmetric:
Symmetric key algorithms work by using a single key to encrypt and decrypt information.
Asymmetric cryptography uses two keys: as stated above, a public key encrypts messages and a private key decodes them.
The most common algorithms used to generate public keys are Rivest-Shamir-Adleman (RSA), elliptic curve cryptography (ECC), and Digital Signature Algorithm. The public key is typically stored on a public key infrastructure (PKI) server and is used to encrypt data securely before sending it over the internet.
The process for sending and receiving data via asymmetric cryptography typically consists of five steps:
Key generation. Each individual generates a public and private key.
Key exchange. The sender and recipient exchange public keys.
Encryption. The sender's data is encrypted using the recipient's public key.
Sending encrypted data. The encrypted data is sent to the recipient.
Decryption. The recipient decrypts the message using his/her own private key.
Since the public and private keys are mathematically connected, they are used together to encrypt and decrypt information. If anyone other than the owner of the private key tries to decrypt the information using the public key, the information will be unreadable.
Bonus: The Origin of Public Key Encryption
In 1976, Whitfield Diffie, Martin Hellman, and Ralph Merkle published a paper entitled, "New Directions in Cryptography." I this paper, they introduced the idea of public key cryptography and described the first known functional distributed cryptographic protocol. Since then, the public key encryption algorithm has been used in finance, e-business, and e-commerce to keep data secure by using two mathematically linked keys.
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