Public Key

Public Key definition: A cryptographic key used for encryption and to facilitate and verify the legitimacy of signatures, in combination with a private key.

Understanding the concept of a public key is essential for grasping the foundation of digital signatures, encryption, and user identification within the blockchain ecosystem.

A public key is a cryptographic key that is mathematically related to a private key within a pair of keys used in asymmetric encryption and decryption algorithms. It is publicly shared and known, making it accessible to anyone in the network.

Asymmetric cryptography, also known as public-key cryptography, employs two distinct keys: the public key and the private key. These keys are generated together but serve different purposes. The public key is shared openly, while the private key remains secret and known only to the owner.

The public key is used to encrypt data that can only be decrypted by the corresponding private key. This process ensures secure communication between parties, as only the intended recipient with the private key can decrypt the encrypted data.

Public keys are utilized to create digital signatures, which are unique cryptographic markings applied to messages or transactions. These signatures provide authenticity, integrity, and non-repudiation, meaning the sender cannot deny sending the message.

In the context of cryptocurrencies, a public key often represents a user's address or identity. Cryptocurrency transactions use public keys to specify the recipient's destination, ensuring that funds are sent to the intended party.

Many cryptocurrencies implement encoding schemes to transform public keys into shorter and more user-friendly formats, commonly referred to as addresses. These addresses are used to receive funds, and they also serve as an additional layer of privacy by not directly exposing the full public key.

While public keys are freely shareable, they do not compromise the security of the associated private key. However, it's crucial to keep the private key confidential, as it is the linchpin to decrypting messages and accessing digital assets in cryptocurrency wallets. When users hold assets on centralized crypto exchanges, the given exchange would be a custodian of the user's private key.

The information on this website is for general information only. It should not be taken as constituting professional advice from Koinly. Koinly is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances. Koinly is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website.
Michelle Legge
By Michelle LeggeHead of Crypto Tax Education
Updated Nov 9, 2023
This article has been fact checked and reviewed as per our editorial policy.