The „crypto“ in cryptocurrencies stand for cryptography. Bitcoin and other crypto rely on public-key cryptography. In this article, we answer two basic questions: How does it work and why is it so secure?

The Public Key

If you like to receive Bitcoin you’ll need an address. This address is the public key and enables anybody around the world to send BTC to this address. In this sense, it works pretty much like an account number. Public keys are pseudonymous, meaning that nobody can connect an address to you unless a connection to the owner gets somehow revealed.

While a public key enables you to receive Bitcoin it won’t allow you to spend the BTC that are stored on it. In order to control a certain public key, you will need control over its counterpart.

The Private Key

Each public key has its own private key assigned to it. They always come in pairs and each time you create a new public key in your wallet a private key is created along with it. Meaning that the private key is basically a secret that allows unlocking the amount Bitcoin received on its public key.

Needless to say, a private key should be treated like cash and is highly valuable. Whoever gets his hands on this secret will automatically control the respective public key. In order to make it easier to handle all these keys, there are different types of wallets.

If this type of application is new to you, you might read on to our different guides for hardware wallets, desktop wallets and mobile wallets.

Is this all safe?

Yes, because public-key cryptography is part of modern-day cryptography in many different fields and has a proven track record as well as a scientifically proven theoretical background. It is not only part of the foundation of crypto, but also of everyday use in IT.

E-mail encryption with PGP is a common example, as well as SSL encryption of websites or opening an SSH connection to remotely control a server or any other computer for that matter. All these things rely on the same principle, namely that there is a public key to encrypt data and a private key for decryption. That being said, blockchain technology like the one Bitcoin uses is not based on encryption rather on making use of digital signatures.

As long as you keep access to your private keys safe there is absolutely nothing to fear