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Difference Between Bitcoin Private Key & Public Key
A wallet is not a foreign concept to anyone when I mention the term many of you would think of leather-bound accessory that we carry around with us to hold paper, coins and cards which gives us access to money if and when we need it.
As technology has progressed, we've moved to have electronic wallets, which is accessed from your phone via a native application or your internet browser. These custodial wallets have no become commonplace for consumers with banks and additional snap or tap payment services offering it as a value-added service to encourage spending.
As we move into a new generation of financial technology with the help of blockchain and Bitcoin driving the future of decentralised money, we now have a new type of wallet. A Bitcoin wallet has a few distinct features that make it different from traditional custodial eWallets.
How are Bitcoin Wallets different to electronic wallets given by banks
There is more to a Bitcoin wallet than just the funds. A Bitcoin wallet contains the public and private key for each of your bitcoin addresses. The keys help identify your wallet from the millions of other wallets available and gives you individual access to the Bitcoin Network.
Besides these key pairs and a Bitcoin wallet address, your bitcoin wallet also stores a separate log of all of your incoming and outgoing transactions. Every transaction linked to your address will be stored by the bitcoin wallet to give users an overview of their spending and receiving habits.
There are 3 types of Bitcoin wallets
- Custodial wallet
- Hot wallet
- Cold wallet
While custodial wallets are held and run by third party service provides, hot wallets and cold wallets are owned exclusively by the individual. To ensure ownership of a wallet, the concept of a private key and a public key is used.
What is a Bitcoin Private Key?
Your Bitcoin private key is a randomly generated string (numbers and letters). A private key is always related to the Bitcoin wallet address and is impossible to reverse engineer thanks to a strong encryption code base. It is a unique identifier of that specific wallet and all addresses associated with the portfolio.
A private key is a secret, alphanumeric password/number used to spend/send your bitcoins to another Bitcoin address. It is a 256-bit long number which is picked randomly as soon as you make a wallet.
Cryptographic functions well define the degree of randomness and uniqueness for security purposes.
What is a Bitcoin Public Key?
The public is another alphanumeric address/number which is generated from private keys only by using cryptographic math functions. These public IDs are used to receive bitcoins publicly. This address is always seen and broadcasted for receiving bitcoins.
Users can make as many public addresses as they want to collect and store Bitcoins. You can generate as many public keys as you like, and they will all be associated with the same private key. In some cases, your public key is automatically changed to protect your transaction history.
When would I use my Bitcoin private key?
Private keys are used for making irreversible transactions. Yes, irreversible! They are the key to spending and sending your bitcoins to anyone and anywhere. This irreversibility is guaranteed by mathematical signatures which are linked to each transaction whenever we use the private keys to send bitcoins.
And for each transaction, these signatures are unique, even though they are generated from the same private keys. This feature makes them impossible to copy. The user can confidently use the same private key again and again.
Going private or public
Having complete ownership of your funds in a trustless environment can seem foreign to most of us, but it's because we've never had this sort of power before. The individual can now safely hold and store as much money as they would like in various places without the need for a third party.
Private and public keys are essential to this practice, and its a reality for future generations will need to adopt if they would like to practice financial freedom and sovereignty.
If you would like to know more about digital assets or would like to market your digital asset company then don’t be shy we’re happy to assist. Simply contact us
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South African finance business owners can create your free business listing on nichemarket. The more information you provide about your business, the easier it will be for your customers to find you online. Registering with nichemarket is easy; all you will need to do is head over to our sign up form and follow the instructions.
If you require a more detailed guide on how to create your profile or your listing, then we highly recommend you check out the following articles.
If you enjoyed this post and have a little extra time to dive deeper down the rabbit hole, why not check out the following posts on cryptocurrency and blockchain.
- Why Blockchain and Cryptocurrency Is The Future Of Money
- 24 Ways To Earn Cryptocurrency
- How To Pay Tax On Cryptocurrency In South Africa
- How To Buy Bitcoin In South Africa
Disclaimer: This article should not be taken as, and is not intended to provide any investment advice and is for educational purposes only. As of the time posting the writers may or may not have holdings in some of the coins or tokens they cover. Please conduct your own thorough research before investing in any cryptocurrency as all investments contain risk.