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Before sending your first cryptocurrencies, you should understand these base terms: wallet address, public and private keys. With them at hand, your crypto payments will go smoothly and safely. And it’s time we unraveled these notions in more detail. Buckle up!
In the crypto world, cryptography is like a secret language. When you make a transaction, your digital assets are encrypted, or locked up, using complex mathematical algorithms. These codes render your funds unintelligible to unauthorized parties.
Cryptography involves several techniques:
But how is cryptography connected to crypto payments and all these terms: wallet address, public key, private key? Hm? Let’s find out!
A wallet address, or a public address, is a unique identifier to send and receive digital assets. It functions similarly to a bank account number in traditional finance, but with an important distinction: it's designed for blockchain networks.
The wallet address consists of a string of alphanumeric characters and ranges from 26 to 35 characters in length, depending on the cryptocurrency. For example, a Bitcoin address starts with "1" or "3", Ethereum addresses can be recognized with "0x".
This public address is created when you set up a crypto wallet. You, the user, are the one who forms the wallet address. Just like creating a new email account—you choose a wallet provider, follow their instructions to set up the crypto wallet, and then the wallet generates a unique address for you.
But how?
Let's break down how your crypto wallet generates an address:
Now it’s time to discuss the keys in greater detail. Shall we?
A private key is a unique, secret piece of data used to sign transactions and gain access to cryptocurrency funds. Think of it as the password to your cryptocurrency wallet. A long, randomly generated string of letters and numbers gives you access to your digital funds. And this is your private key.
Signature. When you want to send cryptocurrency from your wallet to another address, you use your private key to create a digital signature for the crypto payment. This signature is mathematically linked to the transaction data and is unique to your private key. It proves that you are the rightful owner of the funds and ensures the transaction's authenticity.
Access. Private keys are also used to access and control your cryptocurrency wallet. To view your balance, send funds, or perform other actions with your wallet, you must prove ownership by providing your private key. Access to the private key grants full control over the cryptocurrency in your wallet, so keep it secure and confidential.
You might have heard one of the following terms "seed phrase," "mnemonic phrase" or "recovery phrase." All these refer to the same concept, a secret phrase that consists of a sequence of words used to back up and recover a cryptocurrency wallet. It's typically composed of a set number of randomly chosen words (commonly 12 or 24 words) from a predefined list of words.
Secret phrases are easy to write down and remember. Along with that, thet guarantee a high level of security. Each word in the phrase represents a piece of your wallet's private key information. Even if you lose your device or forget your password, you can use the seed phrase to regain control of your funds.
Here's how secret phrases work. When you create a new cryptocurrency wallet, you're usually prompted to generate a secret phrase. You write the words in the exact order and store them securely, preferably offline.
If you ever lose access to your wallet, you can restore access using the secret phrase. Most wallet software allows you to input the mnemonic phrase during the recovery stage and return access to your funds.
You get that, right? Let’s move on to public keys.
A public key is a cryptographic key shared openly and used for encryption, verification, or authentication. It's derived from a corresponding private key through a mathematical process and forms a key pair. While the private key is kept secret, the public key is freely distributed.
Encryption is one of the primary functions of a public key. Imagine you want to send crypto to your friend. Your wallet uses your friend’s public key to encrypt the transaction details. The encrypted transaction is then broadcasted to the cryptocurrency network. When your friend receives the encrypted transaction, they use their private key to decrypt the crypto payment. No one else can access the funds you’ve sent, since it’s only your friend who has a matching wallet address, public and private keys.
Verification is another function of public keys. When you initiate a blockchain transaction, you digitally sign it with your private key. This generates a unique signature specific to the crypto transaction. Miners validate and include your signed transaction in a block, which is then added to the blockchain. Anyone can verify the authenticity and integrity of your crypto payment by using your public key to decrypt the signature. If the decrypted signature matches the transaction details and your public key, it proves transaction genuine and untampered.
Authentication is also what public keys do. Opening your cryptocurrency wallet, you authenticate yourself using your private key. The wallet software verifies your identity by decrypting the authentication message using your public key. If the decrypted message matches the expected value, you get into your wallet.
Now you have overviewed the major terms and can start buying and sending cryptocurrencies. To upgrade your skills, check out the following tips and instructions.
Here's the thing. Your public wallet address is like your digital mailbox where people can send cryptocurrencies. It's a long string of letters and numbers, kind of like an email address. You share it with others when you want them to send you funds.
On the other hand, your private key is like the key to your digital safe where your cryptocurrency is stored. It's a secret code that only you should know. With your private key, you can manage your funds: send them to someone else or transfer them to a different wallet.
While both the public wallet address and private key are important parts of your cryptocurrency wallet, they serve different purposes. The public address is for receiving funds, while the private key is for accessing and controlling your funds. They're not the same thing and shouldn't be treated interchangeably.
That’s not true. A wallet address is akin to your digital ID number. It's created using a mathematical process that does involve your private key, but it doesn't contain any private key information itself. Think of it like a mailing address—it helps people know where to send your mail, but it doesn't reveal anything about the contents of your letters.
Your private key, in turn, unlocks your digital safe where your cryptocurrency is stored. It's completely separate from your public address and is never shared with anyone else.
Just like we described above, when you set up a cryptocurrency wallet, you're usually given a secret (=recovery) phrase. Here's the kicker: you don't need the public address to recover your wallet. The recovery process is solely based on the secret phrase. The public wallet address is just a way to identify your wallet on the blockchain—it's not required for the recovery process.
So, if you ever lose access to your cryptocurrency wallet, you just need your secret phrase to get back in the game. No public addresses!
Time for practice. Let’s secure your wallet!
Mistakes happen, but it's essential to learn from them to prevent similar incidents in the future. Double-check recipient addresses before sending funds, use copy-paste to avoid manual input errors, and consider implementing additional security measures, such as multi-signature crypto wallets or confirmation prompts, to reduce the risk of accidental transfers.
Disclaimer
The information on Coinsniper is user-generated and not verified. Coinsniper does not provide financial advice or facilitate transactions.
Also note that the cryptocurrencies listed on this website could potentially be scams, i.e. designed to induce you to invest financial resources that may be lost forever and not be recoverable once investments are made. You are responsible for conducting your own research (DYOR) before making any investments.
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