Bitcoin Explained #4 - Keys, and How They Work

Greetings guys! Last we left off, I had just explained how transactions go on in Bitcoin! Today, I’ll explain an equally crucial part of this cryptocurrency – they keys, private and public, which prove you have ownership over the amount of Bitcoin you have.

For those unaware, this is all part of a series I’ve started after reading “Mastering Bitcoin”, by Andreas Antonopoulos, in order to better spread awareness of how this new cryptocurrency works.

Let’s get started, shall we?

1 – Keys are what prove you own Bitcoin

The Bitcoin system, as you all know, does not function with physical money. Unlike normal currency, where you can show the money you have by simply taking it out of your wallet, this cryptocurrency is a little trickier. Satoshi Nakamoto concluded back when he wrote the white paper of Bitcoin, that the best way to show ownership was through a signature based system.

Let’s remember how the blockchain works. It’s a massive network, containing all transactions ever made with Bitcoin. As we’ve seen in previous chapters of this series, every transaction is signed by the person who took part in them. Those signatures are proof that the person did the transaction. By seeing all the transactions signed by this person, you can see the history of this person on Bitcoin, and thus see how much money they have.

Pretty simple so far, right? Let’s go a little deeper though…

2 – There are 2 different types of keys – private and public

Two keys are needed in order to run a Bitcoin account. One of those keys is known as a public key.

This key is like your bank account number. It’s the address to which people send Bitcoin they want to send to you. It’s the key that gets shown to the world, and it’s the key that most users will see.

The private key is a little more… private. It’s basically the signature that you apply over every transaction you yourself make. It’s basically what allows you to control the Bitcoin you own, and it’s the most important of the two keys. Users rarely have contact with it, and it’s mostly handled by their wallet software.

Speaking of which…

3 – Both of the keys are saved in a wallet

Wallets, for this currency, function a lot differently than physical wallets we use day-to-day. These wallets simply save the private and public keys, and build transactions with them, instead of physically storing the money.

There are many different kinds of wallets, enough to spend a whole article talking about it (I’ll get around to that eventually). For now though, just know this – if you don’t have a wallet, you should create one, to minimize the risks of losing money in an exchange hack.

All this info provides some great context, but if you look into it, it’s really barebones, isn’t it? Well, it’s time to dig a little deeper into everything… and we’ll be doing it next time!

That wraps this up!

Abrupt end, right? Sorry, but with all the work I’ve been doing, I can’t devote more time into this :(

Please try to understand, and I’ll be trying to go back to producing more quality content as soon as I am able.

In the next article, I’ll go a little deeper on how keys are made, how they work, how they tie into the wallets, etc.

In the meanwhile, I hope you enjoyed this article, and if you have any question or criticism, feel free to sound off in the comments below!

Till the next one guys! Steem on!