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Public and private keys are at the heart of digital asset security, guaranteeing their protection against theft or loss. Unfortunately, poor management of these keys can have disastrous consequences, such as fund theft or the inability to access one's wallet.
Protecting your cryptos also depends on choosing the right type of wallet: hot hot wallet the internet, offer decentralization and ease of access, but remain more vulnerable to cyberattacks; while cold wallet , disconnected and therefore much more secure, represent the ideal solution for long-term storage.
So, how do these keys work and why is their management crucial in the world of cryptocurrencies? Let's explore these essential concepts together to protect your assets in a decentralized system.
Table of Contents
What exactly are a public key and a private key?
A simple definition
Think of your public key like a statement : you can share it safely to receive funds. However, your private key is like your bank account password : it must remain strictly confidential, as it grants full access to your cryptocurrencies.
- Public key : This is used to receive cryptocurrencies. You can securely share it with anyone who wants to send you funds, just like you would give out your bank account details.
- Private key : This allows you to unlock and spend your cryptocurrencies. If someone gets hold of it, they can access your wallet and steal your digital assets.
How do they work together?
These two keys are based on a fundamental concept called asymmetric cryptography . This principle relies on a pair of mathematically linked keys: a public key and a private key.
Here's how it works:
- The public key is used to "lock" funds in your wallet. When someone sends you crypto, the transaction is recorded on the blockchain and associated with your public key. In other words, the public key designates a place where the crypto is stored, but does not allow direct access to it.
- The private key , on the other hand, is essential to "unlock" these funds. It digitally signs each transaction to prove that you are indeed the legitimate owner of these cryptocurrencies. Without this signature, the funds remain inaccessible.
This mechanism ensures robust security, as only the holder of the private key can access the cryptocurrencies. However, if this private key is compromised or lost, your funds become unrecoverable. This underscores the importance of protecting it carefully, just as you would protect your bank account password.
Why are the keys unique?
When a user creates a wallet for the first time, whether via a hot wallet (connected to the Internet, such as MetaMask , Trust Wallet or Exodus) or a cold wallet (such as Ledger or Tangem, disconnected from the Internet), a cryptographic system automatically generates a private key and one or more public keys .
One public key per blockchain
The private key is the foundation of everything. It is used to derive one or more public keys. However, each blockchain has its own characteristics and uses different methods to generate public addresses. Thus:
- A single private key allows control of multiple public addresses on different blockchains.
- For example, a public key used on Ethereum will be different from the one used on Bitcoin, even if they are both derived from the same private key. This facilitates interoperability while ensuring that funds on each blockchain are properly isolated.
The role of the seed phrase
When creating a wallet, a seed phrase (recovery phrase) is also provided to the user. This phrase, composed of 12, 18, or 24 words, is essentially a simplified, human-readable version of the private key.
This means that the seed phrase is the ultimate safeguard of your wallet. But be warned: if someone obtains your seed phrase, they will be able to access all your cryptocurrencies , regardless of the blockchain.
Best practices for securing your keys
Use a secure wallet
To protect your keys, it is essential to choose a wallet that suits your needs:
- Hot wallets hot wallet These internet-connected tools, such as MetaMask, Trust Wallet , or Exodus, are convenient for quickly accessing funds and making regular transactions. However, they are more vulnerable to online attacks, such as phishing or hacking.
- Cold wallets cold wallet These devices, such as Ledger or Tangem, operate offline. They offer maximum security because they are isolated from networks, thus significantly reducing the risk of hacking.
Back up your keys
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- If possible, use multiple copies of your seed phrase. Store them in different places, for example in a safe or a secure location at the home of a trusted relative.
Never share your seed phrase or private key with anyone. Scams often target users by requesting this information under the guise of technical assistance or investment opportunities.
Write down your seed phrase on paper, in a safe place, and never store it online. A photo or digital copy could be compromised if your device or cloud account is hacked.
Update your security practices regularly
- Verify the origin of your wallets: Download wallet applications only from official websites or stores to avoid compromised versions.
- Activate additional protections: If your hot wallet allows it, add a layer of security, such as a password or biometric authentication.
- Stay informed about threats: Attacks, such as malware or phishing scams, are constantly evolving. Understanding the risks can help you better protect yourself.
Public key and private key in the crypto ecosystem
Their role in centralized and decentralized exchanges
On a CEX (centralized exchange) like OKX , the platform holds your private keys and does not share them with you. This means you don't have direct control over your cryptocurrencies, unlike with a personal wallet. However, to receive funds, each CEX provides unique public keys for each supported blockchain network ( Ethereum , Bitcoin , Solana , etc.).
These public keys are associated with your centralized account. For example, if you send funds to an Ethereum public key provided by Binance, those funds will be credited directly to your Binanceaccount. The public key thus acts as an identifier for receiving funds on the platform, but the private key remains entirely under the control of the centralized exchange.
More information about the rewards can be found here.
In a DEX (decentralized exchange), the situation is different. You connect the DEX to your wallet. This means you hold your private and public keys, giving you complete control over your assets. It also means you are entirely responsible for their security, requiring rigorous management of sensitive information such as your seed phrase and private key.
Use cases for keys in Web3
Access to decentralized applications (DApp)
In the Web3 , your private and public keys are the gateway to interacting with a multitude of decentralized applications ( DApps DApp . It is thanks to your digital wallet, which contains your keys, that you can access and use these services.
For example, your keys allow you to:
- to buy NFTs on OpenSea ,
- to obtain a decentralized loan via protocols like AAVE or Compound ,
- or you can stake your cryptocurrencies on platforms like Lido to generate returns.
Each transaction or interaction with these DAppis digitally signed with your private key, thus guaranteeing your authorization and the security of the operation.
A concrete example: perpetual contracts
To trade perpetual contracts , your keys play a crucial role. They allow you to interact directly with the smart contract of platforms like Hyperliquid or dYdX . These smart contracts automatically execute transactions and guarantee the transparency of exchanges. Thanks to your keys, you can open, manage, and close your positions independently, without relying on an intermediary.
FAQs about private and public keys
1. Why are private keys so important?
Private keys allow you to access and spend your cryptocurrencies. If you lose them, your funds become inaccessible. They are most often represented by a seed phrase.
2. Where should I store my private keys?
Use a secure wallet, preferably a cold wallet, and write down your key on paper in a safe place.
3. Can I share my public key safely?
Yes, the public key is only used to receive cryptocurrencies. It does not give access to your funds.
4. What should I do if I lose my private key?
Unfortunately, there is no way to recover a lost private key. Therefore, backups are essential.
Conclusion
Public and private keys are the cornerstone of security in the world of cryptocurrencies. Understanding how they work and adopting best practices is crucial for navigating this ecosystem with confidence. To deepen your knowledge, click on the bold words to discover our articles on CEX vs. DEX and Web3 , two essential concepts for mastering the crypto world.
Cryptocurrency investments are risky. Crypternon investment advice .
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Yoann
Trained as an engineer, I quickly became interested in the field of finance. Convinced that decentralized finance has a bright future, I am participating in its democratization by developing Crypternon.
