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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 cryptocurrencies also depends on choosing the right type of wallet: software wallets (often called hot wallet ) , connected to the Internet, offer decentralization and ease of access, but remain more vulnerable to cyberattacks; while physical wallets (often called 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 public and private keys?
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.
Here's how it works:
- The public key is used to "lock" funds in your wallet. When someone sends you cryptocurrency, the transaction is recorded on the blockchain and associated with your public key. In other words, the public key designates a place where the cryptocurrency 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 , Trezor 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 recovery phrase (often called a seed phrase) is also provided to the user. This phrase, composed of 12 or 24 words, is actually a simplified, human-readable version that grants access to all the private keys (a unique key for each blockchain supported by the wallet).
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 private keys, you have twoicptools:
- Software 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.
- Physical wallets ( cold wallet ) : These devices, such as Ledger , Trezor , 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
- If possible, use multiple copies of your seed phrase. Store them in different locations, such as a safe or a secure place at a trusted friend's house. This provides a backup solution if you have a problem with the original. Keep in mind, however, that the more copies you make, the greater the risk of leakage. Use them as a potential backup, but don't multiply them to the point of losing control.
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 or another physical medium ( Ledger for example, offers very sophisticated tools, available here ), 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 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 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.
Conclusion
Public and private keys are the cornerstone of security in the world of cryptocurrencies. You can share your public key like a bank account number, but never share your private keys or your seed phrase.
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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.