Public Keys: Everything to Know

By  Beluga Research August 3, 2023

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  • A public key is a string of characters that creates a cryptographic code, which is then used to receive cryptocurrency transactions
  • For the public key to work, it must be paired with a corresponding private key
  • A public key is essentially an address for a digital wallet - the corresponding private key functions as the key to unlock the digital wallet
  • A user can share a public key without the threat of their wallet being hacked


Cryptocurrency public keys are unique digital codes used to receive funds and verify transactions on blockchain networks. A public key and a private key are two halves of a cryptographic system to engage in a number of transactions involving cryptocurrency. The public key functions as the address for a digital wallet, while the private key functions as the key to unlock that wallet.

A user can share their public key with others, as it offers a secure way for parties to communicate and is necessary to generate a digital signature and verify a transaction. However, users should never share their private key.

A Brief History

Traditional cryptography, or secret-key cryptography, relied on the sharing and use of one secret key by both the sender and receiver to encrypt and decrypt messages. This all changed in 1976 with the advent of public-key cryptography, the brainchild of Whitfield Diffie, Martin Hellman and Ralph Merkle. Up until this point, key distribution was cryptography's biggest problem, as traditional cryptography required people to meet face to face with their trusted party to share their secret key. Now with public-key cryptography, users can generate a key pairing and share their public key, allowing anyone with the public key to send encrypted messages to the owner of the private key.

Public Keys: Everything to Know

Public keys are a combination of random numbers and letters that help a user generate digital signatures. They are designed to be shared openly without compromising the security of the private key.

When a user initiates a crypto transaction, the combination of the transaction data and the private key create a digital signature that serves as proof of authenticity and ensures the transaction has not been tampered with during transmission. In other words, the digital signature allows the network to verify the integrity of a transaction and confirm that the owner of the private key is the person who signed the transaction.

With public-key cryptography, blockchain users can securely send messages via end-to-end encryption. The public key allows anyone to encrypt a message, while the private key ensures that only its owner can decrypt the message. Thanks to DIffie, Hellman and Merkle, crypto investors are assured confidentiality and privacy in a decentralized, trustless environment.

The other security advantage of public keys is that it takes a one-way mathematical function to create them, meaning that it's easy to generate a public key, but one cannot access the corresponding private key by reversing the same mathematical function. This one-way function is what makes it acceptable for crypto holders to share their public key without worrying about exposing their private one.

Getting Started

  • Security. Due to the combination of public and private keys, public-key cryptography provides a more secure way to transactions.
  • Key Generation. The public key is mathematically derived from the private key.
  • Access. Thanks to public-key cryptography, crypto investors can participate in decentralized crypto networks without having to trust another investor.

Unique Aspects

  • Inherent asymmetry. A public key can be shared because it isis mathematically impossible to derive a private key from a public key. This aspect is crucial for ensuring that cryptocurrency transactions are secure.
  • Digital signatures. Digital signatures authenticate a message or transaction. When sending funds to another user, the sender's private key allows them to create a digital signature and attach it to the transaction. Anyone with the corresponding public key can verify the authenticity of the transaction.
  • Role in address generation . In most cryptocurrencies, users have addresses derived from their public keys. These addresses serve as the destination for funds in transactions. By sharing such addresses, users can receive funds from others securely. They do not need to reveal their public key or any personal information.
  • Encryption and decryption . Encryption is not directly involved in most cryptocurrency transactions. Yet it is an essential component in privacy-focused cryptocurrencies. In such systems, public keys are used to encrypt messages or transactions. These can only be decrypted by the corresponding private key holder. This feature ensures confidentiality.


  • Enhanced security. Public keys leverage asymmetric encryption algorithms such as the Elliptic Curve Cryptography (ECC) that make it impossible for one to derive a private key from a public key. These algorithms promote security and ensure that only the intended recipient of funds can access them.
  • Anonymity . Because public keys do not reveal the identity of the users behind them, they allow users to send and receive funds with a degree of anonymity and high degree of privacy, aspects that are highly valued by most members of the crypto community.
  • Efficient verification. Public keys enable quick and efficient verification of transactions. A user must know the recipient's public key in order to send them funds. This ensures the funds are being sent to the correct person and eliminates the need for third parties.
  • Compatibility . Public keys are compatible across different cryptocurrency platforms and wallets. Users can use the same public key to receive funds from various sources, regardless of which cryptocurrency is involved. This interoperability simplifies the user experience. It also fosters wider adoption of cryptocurrencies.


  • Lack of identity verification. In some ways, public keys are a double-edged sword. They're inherently anonymous, which is a perk for honest users, though it poses a challenge when it comes to bad actors who exploit this anonymity and engage in illegal activities.
  • Irreversibility of transactions. It is extremely difficult to reverse a transaction that has been initiated and recorded on the blockchain. While this characteristic ensures the immutability of the blockchain, it also complicates the recovery of funds. Therefore a user could suffer losses if they accidentally sent funds to the wrong public key or fall victim to a scam. The irreversible nature of transactions places a significant responsibility on users. A user should triple-check a recipient's public key before initiating a transfer.
  • Potential for loss. Public keys are typically represented as long alphanumeric strings. It is hard to remember the information in these strings. If a user loses access to their public key through hardware failure or forgetting the data, they may also lose access to their cryptocurrency holdings. A user should securely store and back up their public keys to prevent theft and loss.
  • User error vulnerability . Public keys rely on users' ability to accurately copy and paste or enter the correct key information. Human error can lead to mistakes when transcribing public keys. This can result in funds being sent to the wrong address. Users should exercise caution and carefully verify the accuracy of public key information to avoid theft and loss.