A lot of confusion is caused by images of gold coins with the Bitcoin symbol on them. It gives the impression that bitcoins are physical things. This couldn’t be further from fact.
In truth, cryptocurrencies exist on blockchains and are accessed through the use of private and public keys.
What’s a blockchain? Think of it as a record of who owns what. Understanding how a blockchain works isn’t mandatory for using one, just like it’s possible to use a computer without understanding how to program an operating system. The blockchain shows every owner of every single coin (or fraction of a coin). On the blockchain, the “owner” of the funds is identified by a public key.
What’s the difference between private and public keys?
Coins are accessed by having a private key which corresponds to a public key. Think of the private key as the “password” and the public key as the account number. If you lose your private key, you lose access to your coins.
When someone says, “I own X amount of Y cryptocurrency”, what they really mean is “I have the password (private key) for an account (public key) which has X number of coins on the blockchain of Y cryptocurrency”.
There are many blockchains in existence which facilitate cryptocurrencies and other applications.
Crypto wallets make it easy to store and manage cryptocurrencies. Some are mobile or desktop applications while others are just paper based. Wallets are the interface between both the private and public keys and the blockchain.
Let’s take a look at the wallet app for thenewboston cryptocurrency as an example:
As the name suggests, the public key is public, and therefore, visible. In this wallet, the public key is called “My Account Number”. If someone wanted to send coins to this account (which they would do with the “Send Coins” button in the top right), they would use the public key string of characters.
Note the button next to “My Account Number”. This is used to copy the key to the clipboard and should be used rather than typing it out. Both private and public keys need to be exactly correct in order to work as expected and both are case sensitive. There is also a QR code, which can be scanned to copy the public key.
As the private key is a secret, and must remain so, it’s hidden by a string of * characters. For added security, it’s possible to copy the key to the clipboard or download it without even seeing what it is. This extra precaution is taken in case there is malware on the computer which has access to the screen and could steal the key. If someone else gains access to your private key, they gain access to your coins.For this reason, it’s important to never share your private keys with anyone.
When working with any type of cryptocurrency, it’s important to backup the private key by saving it elsewhere.
Back to the blockchain
Imagine someone sends the above account number (public key) 100 000 coins. The transferral of the coins would show on the blockchain going from the sender’s account number to the above account number. As the transaction is on the blockchain, it’s public information.
While that level of transparency may seem strange at first, it highlights one of the differences between the traditional system of exchange and cryptocurrency. You are presently reading this blog post on a device of some sort. It’s possible to discern that the device was purchased and who the buyer and seller are, but not how much was paid. The parties involved with the transaction can be known but the price is private. The difference with cryptocurrency is that the parties involved are private, but the price is public.
Note that it’s possible to have multiple accounts within one wallet. In fact, for security and privacy purposes, it’s prudent to use multiple accounts when working with cryptocurrencies. If you only use one account and it is compromised, all the coins would be at risk.
A common question is, “If someone knows my public key, could they figure out my private key?” The short answer is no. Thanks to asymmetric encryption, which means that it’s easy to go from private to public but not the other direction, it’s basically impossible to find the private key from a public key. Satoshi Nakamoto, the inventor of Bitcoin, owns approximately $60 billion worth of bitcoin as of February 2021. All their public keys are available on the blockchain, yet no one has been able to access their fortune.
With the advancement of blockchain technology, passing coins back and forth is just the beginning of the potential uses. Texting apps, games, and other banking processes are also being incorporated into the blockchain.
For more information about thenewboston coin, check out the announcement video
(https://www.youtube.com/watch?v=D-3i1g5YFik) and our Facebook
(https://twitter.com/bucky_roberts), Reddit (https://www.reddit.com/r/thenewboston/) and Youtube (https://www.youtube.com/user/thenewboston) pages.