Even if you’re familiar with Bitcoin, you might not know the difference between private and public keys. Discover everything you need to know to get started.
7 min read
The following statements do not constitute investment advice or any other advice on financial services, financial instruments, financial products, or digital assets. They are intended to provide general information. The following statements do not constitute an offer to conclude a contract for the purchase or sale of financial instruments and financial products or an invitation to submit such an offer and to buy or sell any particular digital asset. Cryptocurrencies are subject to high fluctuations in value. A decline in value or a complete loss are possible at any time. The loss of access to data and passwords can also lead to a complete loss.
Private keys are secure codes for cryptocurrency transactions and proving ownership, while public keys allow others to send cryptocurrency to you.
It’s crucial to keep private keys safe. If your private key gets lost or stolen, you could irreversibly lose access to your Bitcoin holdings.
Various types of crypto wallets offer different levels of security for storing these keys. Keeping private keys offline and using hardware wallets are both good ways to boost security.
If you’ve dipped your toes into the world of Bitcoin, you’ve probably come across the concept of crypto wallets, and may have even heard of private or public keys. But what exactly are they? In this article, we take a look at the differences between private and public Bitcoin keys, and help you understand how they help you send and receive funds safely.
What is a crypto wallet?
A crypto wallet allows you to send, receive, view, and spend cryptocurrency. The wallet is also where your keys (both private and public) live, giving you secure access to any crypto you own.There are different kinds of crypto wallets: simple hosted crypto wallets, where a platform looks after your private key for you, and non-custodial wallets, where you control your private keys with no third-party involvement at all. There are also hardware wallets, where your keys are stored offline, which some deem more secure. They all share one feature: they’re used for storing your crypto keys.
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A private key is a secure code that enables the holder to make cryptocurrency transactions and prove ownership of their holdings. Bitcoin keys specifically feature a 256-bit string displayed as a combination of letters and numbers. It’s stored within your crypto wallet, enabling you to access your Bitcoin whenever you need to.
Private keys and the risk of loss or theft
Keep in mind that if someone manages to get their hands on your private key, they’re effectively gaining access to your Bitcoin holdings too, putting your crypto is at risk. The same goes for losing your private key—if you’re unable to access it for whatever reason, you’ll likely be unable to access your coins.The risks associated with misplacing or losing your private key cannot be emphasized enough, and you’ll want to seriously consider them before wading into cryptocurrency. Regulations around the use and safekeeping of private keys are still in development; in Germany, for example, the safekeeping of private keys for customers is a regulated financial service.
What is a public key?
Unlike a private key, a public key is designed to be disclosed to other people so they can send you cryptocurrency. It’s linked to the holder’s private key, which is needed to “unlock” the public key. Sometimes a Bitcoin address is used for transactions instead, since they are essentially compressed versions of the public key.Imagine public and private keys like you would your house address and house keys, respectively. People will need your house address so they can stop by, yet will only be able to enter with your house keys.
What is a Bitcoin address?
A Bitcoin address is a unique string of numbers and letters of 26-35 characters in length that shows where a Bitcoin payment has been sent to and from. You can generate a Bitcoin address from your crypto wallet if you’d like to use one in a transaction. For security reasons, experts recommend generating a fresh Bitcoin address for each transaction.
Is a Bitcoin address the same as a Bitcoin private key?
Absolutely not. You should never share your Bitcoin private key, but you can share a Bitcoin address with anyone who wants to send you Bitcoin. Think of the Bitcoin address as a hashed form of your Bitcoin public key for easier use in transactions.
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Here's where and how you might find or manage your private key, depending on how you store your Bitcoin:
Software wallets (desktop, mobile, or online): When you use a software wallet, your private key is stored within the application. Generally, the wallet will offer a way to view or export your private keys through its interface, often found in the settings or security section. Some wallets might display a seed phrase instead of a direct private key, which is a human-readable form of your key(s).
Hardware wallets: Hardware wallets, such as Ledger or Trezor, store your private keys offline on a physical device. These wallets usually don’t display your private key directly. Instead, transactions are signed within the device, and the key stays secure. If you need to recover your wallet, you'll use a seed phrase provided when you set up the device, not the private key itself.
Paper wallets: If you have a paper wallet, your Bitcoin private key might be printed on it as a series of letters and numbers or as a QR code. Paper wallets are considered cold storage and aren’t connected to the internet. To access your Bitcoin, you'll need to input the private key or scan the QR code into a software wallet.
Exchange accounts: If you bought Bitcoin through an exchange and haven't moved it to your personal wallet, the exchange technically controls the private key, and you won’t have access to it. In this case, your ability to transfer or spend your Bitcoin depends on your account with the exchange.
How to use a public key to send Bitcoin
If you’d like to pay someone using Bitcoin, it’s a fairly straightforward process:
Make sure you have enough Bitcoin in your wallet to cover the amount you want to send, and make sure you’ve selected the right currency.
Obtain the recipient’s Bitcoin public key or address and input it into the “Recipient” field in your wallet. (Keep in mind that different wallets and platforms might use slightly different language.)
Double check that you’ve entered the correct public key. If you enter the wrong public key, your Bitcoin will go to someone else and you probably won’t be able to get it back.
Type in the amount you’d like to send.
Click “Send” and you’re all set.
How to use a public key to receive Bitcoin
If you’re expecting to receive some Bitcoin, this is what you’ll need to do:
Open your crypto wallet and select “Receive” to access your public key (the specific language used may change depending on your wallet).
Share your public key with the sender.
Sit back and wait for the Bitcoins to appear in your wallet.
How to keep your private key safe
As we mentioned earlier, keeping your private key safe is the most important part of making sure no one else has access to your Bitcoin. Never share your private key with anyone. Remember that for transactions, other people only need your public key or Bitcoin address. If possible, it’s a good idea to keep your private key offline rather than on a device that can be accessed via the internet. If you’re especially concerned about security, consider hardware wallets as an extra secure form of offline storage. The advantage here is that they can’t be hacked when you’re not entrusting your key to a third-party.It may be a good idea to back up your private keys in case you lose them. The types of backup available to you will depend on the crypto wallet you use. There are three main ways you can back up your private key:
A seed phrase, which is a phrase consisting of 9-24 regular words
A wallet file backup
Keeping a copy of the private key itself somewhere very secure
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We’ve taken a deep dive into private and public Bitcoin keys, but this article only scratched the surface of everything there is to know about cryptocurrencies. Whether you’d like to know more about crypto and security, or step back and learn the basics of cryptocurrency, N26 is here for you, every step of the way.
If you use an online wallet to store your cryptocurrencies, it will generate the private key for you.
A private Bitcoin key is a 64-character string of letters and numbers. It might look something like this: E9873D79C6D87DC0FB6A5778633389F4453213303DA61F20BD67FC233AA33262.
Unfortunately, if you’ve lost your private key, there’s usually no way to get it back unless you’ve backed it up. In other words, if you lose your private key, you’ll lose your associated Bitcoin, too.
