• support@madhedgefundtrader.com
  • Member Login
Mad Hedge Fund Trader
  • Home
  • About
  • Store
  • Luncheons
  • Testimonials
  • Contact Us
  • Click to open the search input field Click to open the search input field Search
  • Menu Menu

Crypto Keys 101

Bitcoin Letter

Cryptography transcends use cases from intelligence agencies — military writing — decoding confidential text messages.

Public and private keys are an important part of Bitcoin (BTC) and other cryptocurrencies.

They allow you to send and receive cryptocurrency without requiring a third party to verify the transactions.

The basic concept behind the two-key system is the following:

  • the public key allows you to receive transactions, while the private key is necessary to send transactions.
  • Using two different keys (a public and a private key) is called asymmetric cryptography.

What Is a Public Key?

A public key allows you to receive cryptocurrency transactions.

It’s a cryptographic code that’s connected to a private key.

While anyone can send transactions to the public key, one needs the private key to “unlock” it and prove ownership of the cryptocurrency received in the transaction.

Therefore, freely sharing a public key is without risk.  

While anyone can send the public key safely, someone would need the private key to unlock and access these sent funds.

What Is a Private Key?

A private key offers the ability to prove ownership or spend the funds associated with a public address. A private key is unique and can take many forms:

  • 256 character long binary code
  • 64-digit hexadecimal code
  • QR code
  • Mnemonic phrase

What Does It Mean to “Digitally Sign” a Transaction?

For a transaction on the blockchain to be complete, it needs to be signed. The steps for someone to send a transaction are:

  • A transaction is encrypted using a public key. The transaction can only be decrypted by the corresponding private key.
  • The transaction is signed using the private key confirming the transaction hasn’t been modified.
  • The digital signature is generated by combining the private key with the data being sent in the transaction.
  • Lastly, the transaction is verified as authentic using the accompanying public key.

Digitally signing a transaction means to prove the owner of the sent funds. Nodes check and authenticate transactions automatically. Any unauthenticated transactions get rejected by the network.

Where Are My “Private Keys?”

Private keys are in a cryptocurrency wallet, which is usually on a smartphone, desktop software, or a specialized hardware device.

Private keys are not on the cryptocurrency blockchain network.

If crypto assets are held on an exchange, then the exchange is the custodian of these private keys.

How public and private keys work together is essential to understanding how cryptocurrency transacts.  

Buying crypto is effectively owning a private key that proves ownership of that cryptocurrency.

Since the record is stored on the blockchain, anyone can verify the individual as the owner with a specific public key.

Just remember that deferring to crypto exchange to hold a private key means a crypt holder trusts them with the security of protecting their crypto assets.

There is always the choice of taking custody of one’s own crypto in a hot or cold wallet.

Depending on the degree of comfort, philosophy, risk-tolerance, and amount, readers can make that decision for themselves.

Private keys are something that should never be shared.

And if one eschews their own private wallet for a custodial solution like an exchange, seek out a time-honored, trusted, dealing in large volume, and highly functional exchange instead of a marginal, half-baked exchange.

 

Share this entry
  • Share on Facebook
  • Share on X
  • Share on WhatsApp
  • Share on Pinterest
  • Share on LinkedIn
  • Share by Mail
https://www.madhedgefundtrader.com/wp-content/uploads/2022/08/public-key-cryptography.png 364 936 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-08-09 15:02:072022-08-09 18:30:18Crypto Keys 101
You might also like
Bitcoin or Ethereum
April 21, 2022
September 13, 2022
February 24, 2022
July 26, 2022
The Best Way to Earn Passive Income in Crypto

tastytrade, Inc. (“tastytrade”) has entered into a Marketing Agreement with Mad Hedge Fund Trader (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade and/or any of its affiliated companies. Neither tastytrade nor any of its affiliated companies is responsible for the privacy practices of Marketing Agent or this website. tastytrade does not warrant the accuracy or content of the products or services offered by Marketing Agent or this website. Marketing Agent is independent and is not an affiliate of tastytrade. 

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.

Copyright © 2025. Mad Hedge Fund Trader. All Rights Reserved. support@madhedgefundtrader.com
  • Privacy Policy
  • Disclaimer
  • FAQ
Link to: Quote of the Day - August 9, 2022 Link to: Quote of the Day - August 9, 2022 Quote of the Day - August 9, 2022 Link to: August 9, 2022 Link to: August 9, 2022 August 9, 2022
Scroll to top