This is one article in a collection of 52 articles published weekly throughout 2023 on the basics of Bitcoin. The series is intended for people unfamiliar with Bitcoin or people wishing to enhance their understanding of the fundamentals that underpin the technology. Please contact us, if you have any questions or comments.
Bitcoin private keys, public keys, and addresses are three fundamental components that are essential to the Bitcoin network functioning without a trusted third party. Bitcoin uses public and private key cryptography to secure the transactions in the Bitcoin network. A Bitcoin user’s public key is used to receive payments while the private key is used to sign transactions and authorize transfers of bitcoin to other users. This paper will explore the basics surrounding a bitcoin user's private key, public key, and public address.
The private key is the starting point for all three of these items. From the private key a public key is produced using advanced mathematics. The public key is then hashed twice to create a bitcoin address. All the steps discussed in this paragraph are preimage resistant which means a person or even a super computer cannot determine a person’s private key from the public key or a person’s public key from a person’s bitcoin address. The flow of information only works from private key to public key to public address. It does not work in the other direction.
A user’s private key should not be broadcast to anyone other than the owner of the bitcoin. Private keys are used by individuals who hold bitcoin to prove the ownership of bitcoin when the user wishes to send his/her bitcoin to another wallet using the Bitcoin protocol. In the early days of Bitcoin, many users lost their private keys in part due to the price of bitcoin being miniscule if not altogether nonexistent. When some of the early bitcoin adopters realized that they had thrown away a fortune when they tossed an old laptop into the trash, drastic measures were taken to recover the private keys.
Fortunately, since the early days of Bitcoin, advances have been made that allow Bitcoin users to more safely store their private keys. Today many products require multiple signatures in order to be able to move a person’s bitcoin. Multisig wallets, as this technology is commonly called, create multiple private keys and a certain percentage of the private keys must be input into the software to allow the bitcoin to move (such as two of the three private keys or three of the five private keys). This has safeguarded bitcoin users who have elected to use multisig products from the threat of losing a private key.
A users Bitcoin address is the item that can be seen by all Bitcoin network participants. The Bitcoin address consists of numbers and letters and begins with the number 1 or a 3 and usually has between 26 and 35 characters. The public bitcoin address allows a bitcoin user to receive bitcoin from other users. While the difference is nuanced, the Bitcoin address is used for receiving bitcoin and the public key is used by the nodes to verify transactions associated with the Bitcoin address. Without the corresponding private key, a bitcoin user’s public key is useless. The private key unlocks the bitcoin held within the public key. The private key is paramount to proving ownership of the bitcoin. Therefore, a bitcoin user who self-custodies his/her bitcoin, must protect his/her private key with great care.
