bitcoin - Public and Private key

Bitcoin - private key

Private key is an important part in moving and storing Bitcoin. The easiest way to understand private keys is to think about an old-fashioned mailbox system:

Let's say Maria wants to send mail to Peter. First she needs to know what Peter's mailbox address is. Let's say Peter's mailbox is number 2001. Similarly, if she wants to send Bitcoin to Peter, she needs to know his Bitcoin address, which is a number that uniquely identifies him. This is also sometimes called his wallet address or public key, which functions similar to your bank account number. It's a long and complicated number because there are so many Bitcoin post boxes in the world.

So now Maria deposits the Bitcoin in Peter's mailbox. She can have a peek inside and see the Bitcoin there, in fact anyone who walks by can see that mailbox 2001 is filled with one Bitcoin. This is part of the exciting part of Bitcoin - that everyone can see all the transactions but without anyone having to share their identity. People can see there is one Bitcoin in 2001, but no one except for Maria and Peter will know it belongs to Peter.

Now let's see how Peter gets his Bitcoin - well he can see it's there, so he doesn't have to do anything. But if he wants to move it, he needs to open the box to send it to someone else. To open this he needs a key - and this is his own unique key, also called a private key, that him, and only him can use to open the mailbox. When he opens it he can remove the Bitcoin and deposit into someone else's box, let's maybe say he is buying an online game from Microsoft, now he can deposit it into Microsoft's box.

If Maria deposits into the wrong mailbox, she cannot move it back. This is similar to cash. Also note that no one can move the Bitcoin, except for Peter, who has the key to the mailbox. And if he loses his key? well then no one can access that post box forever! It's also important for Peter to make sure no one steals his key, because if they do they can unlock his box and steal his Bitcoin.