Keys to the Universe
What are Public and Private Keys?
Let's look at how your keys unlock your crypto.
"Not your keys, not your coins."
FirstWatch Crypto is here to explain what controlling your "private key" really means.
Digital currencies utilize the science of cryptography to encrypt certain data. This technique prevents access to digital information by third parties. The public and private keys give access to the users who are supposed to have access. The keys are the most important part of accessing your crypto holdings.
For a non-technical user, what does this actually mean?
To both add new transactions and verify the transfer and location of assets, cryptocurrencies use a system with a "public key" and "private key." We'll dive into the difference between the two below. For historical context, this system was really popular in the "cypherpunk" community, a group speculated to have given rise to the legendary founder of Bitcoin, Satoshi Nakamoto.
Public and Private Keys
"Not your keys, not your coin" is an oft-quoted phrase in the cryptocurrency space. It speaks to the importance of public and private keys used to control your wallet.
Think of a public key like an email address. We use an email address to send and receive digital mail. It's a way to contact you specifically, and publicly, as anyone has access to sending you mail.
A private key, on the other hand, is like your password for logging into your email. You know there are emails sitting in your inbox, but you need your password to see them. Similarly, your wallet can receive crypto, but you need your private key to access and send funds.
Private keys unlock account access to your funds, public keys provide a public receiving address.
So if you want to hold your crypto and make it completely inaccessible to anyone else, you and only you should keep your private key.
Hot wallet exchanges keep your private keys. While the phrase "not your keys, not your coin" might ring true, many crypto owners prefer these hot custodial wallets like Coinbase because it removes worry about storing private keys and allows for easy access and fast transactions.
Multi-signature accounts are worth mentioning as well. Companies such as Unchained Capital offer multi-signature custody accounts that require approval from multiple stakeholders to confirm a transaction. The crypto is held in cold wallets, and a pre-selected group controls the private keys, all of which are required to make a transaction and/or access the funds.
Some ~key~ takeaways:
Public and private keys make up the "cryptography" encryption technology in cryptocurrencies.
Cryptography was used by both the NSA and the "cypherpunks", a hacker group associated with Satoshi Nakamoto.
A public key is similar to an email address for your funds, it is used to send and receive digital currencies.
A private key is a password needed to access your funds that you should control. In today's market, it is often controlled securely by exchanges.
Multi-signature wallets require a majority of people to use a private key to send crypto.
Resources:
Solving forgery: public keys, private keys, and encryption.
The most famous article on cryptography, dating back to 1993.
Another great summary on cryptography and cryptocurrencies.
How to store your private keys.
FirstWatch Crypto
What We Do
Every ship needs people keeping watch. The tireless observers constantly on duty and essential to the ship's safety. FirstWatch Crypto is inspired by this constant vigilance. We are braving the waters together, helping guide your investments through the complex sea of change of cryptocurrencies. These financial technologies have changed the tides of finance, and are leading us to a new world. FirstWatch Crypto brings knowledge and passion for the future of finance and cryptocurrencies. We want to help you achieve a better future by making crypto understandable and accessible for you. We will keep the first watch.
Who We Are
"Bitcoin Blaize" Hrabrick (@blaizebitcoin) and Dan McGlinn (@DigitalDanMcG) are graduates of the University of Notre Dame. They are based in Philadelphia and are both excited about the possibilities that cryptocurrencies bring. They write to get others into crypto financially and philosophically.
Our Values: S.E.A.
Steward new investors on their journey into the cryptocurrency space.
Educate investors on the fundamentals of the revolutionary new asset class of cryptocurrencies.
Anticipate market needs to remain competitive within the crypto sphere.
Disclaimer: None of the above is investment advice. This blog is published for entertainment and informational purposes only. The ideas expressed are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. Nothing on this blog constitutes investment advice, performance data, or any recommendation that any security, portfolio of securities, investment product, transaction, or investment strategy is suitable for any specific person. You should not use this blog to make financial decisions. We highly recommended you seek professional advice from someone who is authorized to provide investment advice. You should always do your own research before investing in cryptocurrencies. It is a volatile market.