Public Key

DEFINITION of 'Public Key'

A public key is a cryptographic code that allows a user to receive cryptocurrencies into his or her account. The public key coupled with the private key are significant tools required to ensure the security of the crypto economy.


When a user initiates his/her first-ever transaction with bitcoin or altcoins, a unique pair of public key and private key is created. Each of the keys are a long string of alphanumeric characters that help to keep a user’s holdings secure in the digital ecosystem. The private key is known to the user alone and serves as the user’s digital ID. The private key authorizes the user to spend, withdraw, transfer or carry out any other transaction from his or her account. A sophisticated algorithm is applied to the private key to generate the public key, and both keys are stored in a digital wallet.

When a transaction is initiated by a user to send, say bitcoins, to another person, the transaction has to be broadcasted to the network where distributed nodes (i.e. people behind computers) confirm the validity of the transaction before finalizing it and recording it on the blockchain. Before the transaction is broadcasted, it is digitally signed using the private key. The signature proves ownership of the private key, although it does not divulge the details of the private key to anyone. Since a public key is fashioned from the private key, the user’s public key is used to prove that the digital signature came from his private key. Once the transaction has been verified as valid, the funds are sent to the recipient’s public address.

The public address is a hashed version of the public key. Because the public key is made up of an extremely long string of numbers, it is compressed and shortened to form the public address. In effect, the private key generates the public key which, in turn, generates the public address. When two people enter into an agreement where one sends the other tokens or coins, they reveal their public addresses to each other. The public address is like a bank account number. The sender needs the number to be able to send the funds to the recipient who will then be able to spend or withdraw it with his private key. The recipient can also verify the sender’s batch of coins using the sender’s public address that will be displayed on his or her screen.

Although the public key and address are worked out from the private key, the reverse case is nearly impossible. The cryptocurrency network stays secure by using complicated mathematical functions to ensure that a private key is not able to be worked out from the public key, especially since the public key and its hash version are seen by everyone on the network. Since its impossible to regenerate the private key from public key or address, if a user loses his private key, any bitcoin or altcoin located at his public address will be inaccessible forever. On the other hand, a user who loses his public key can have it recreated with the private key.