Ownership of bitcoin is established through _digital keys_, _bitcoin addresses_ and _digital signatures_. The digital keys are not actually stored in the network, but are instead created and stored by end-users in a file, or simple database, called a _wallet_. The digital keys in a user's wallet are completely independent of the bitcoin protocol and can be generated and managed by the user's wallet software without reference to the blockchain or access to the Internet. Keys enable many of the interesting properties of bitcoin, including de-centralized trust and control, ownership attestation and the cryptographic-proof security model.
The digital keys within each user's wallet allow the user to sign transactions, thereby providing cryptographic proof of the ownership of the bitcoins sourced by the transaction. Keys come in pairs consisting of a private (secret) and public key. Think of the public key as similar to a bank account number and the private key as similar to the secret PIN number, or signature on a cheque, that provides control over the account. These digital keys are very rarely seen by the users of bitcoin. For the most part, they are stored inside the wallet file and managed by the bitcoin wallet software.
The digital keys within each user's wallet allow the user to sign transactions, thereby providing cryptographic proof of the ownership of the bitcoins sourced by the transaction. Keys come in pairs consisting of a private (secret) and public key. Think of the public key as similar to a bank account number and the private key as similar to the secret PIN number, or signature on a cheque that provides control over the account. These digital keys are very rarely seen by the users of bitcoin. For the most part, they are stored inside the wallet file and managed by the bitcoin wallet software.
In the payment portion of a bitcoin transaction, the recipient's public key is represented by its digital fingerprint called a _bitcoin address_ which is used in the same way as the beneficiary name on a cheque (i.e. "Pay to the order of"). In most cases a bitcoin address is a generated from and corresponds to a public key. However, like a beneficiary name on a cheque, some bitcoin addresses do not represent a public key and instead represent other beneficiaries such as scripts, as we will see later in this chapter. This way, bitcoin addresses abstract the recipient of funds, making transaction destinations flexible, similar to paper cheques: a single payment instrument that can be used to pay into people's accounts, company accounts, pay for bills or pay to cash. The bitcoin address is the only representation of the keys that users will routinely see, as this is the part they need to share with the world.
In the payment portion of a bitcoin transaction, the recipient's public key is represented by its digital fingerprint called a _bitcoin address_ which is used in the same way as the beneficiary name on a cheque (i.e. "Pay to the order of"). In most cases a bitcoin address is generated from and corresponds to a public key. However, like a beneficiary name on a cheque, some bitcoin addresses do not represent a public key and instead represent other beneficiaries such as scripts, as we will see later in this chapter. This way, bitcoin addresses abstract the recipient of funds, making transaction destinations flexible, similar to paper cheques: a single payment instrument that can be used to pay into people's accounts, company accounts, pay for bills or pay to cash. The bitcoin address is the only representation of the keys that users will routinely see, as this is the part they need to share with the world.
In this chapter we will introduce wallets, which contain cryptographic keys. We will look at how keys are generated, stored and managed. We will review the various encoding formats used to represent private and public keys, addresses and script addresses. Finally we will look at special uses of keys: to sign messages, to prove ownership and to create vanity addresses and paper wallets.
@ -18,7 +18,7 @@ In this chapter we will introduce wallets, which contain cryptographic keys. We
((("public key")))
Public key cryptography was invented in the 1970s and is mathematics applied to computer security. Since the invention of public key cryptography, several suitable mathematical functions, such as prime number exponentiation and elliptic curve multiplication, have been discovered. These mathematical functions are practically irreversible, meaning that they are easy to calculate in one direction and infeasible to calculate in the opposite direction. Based on these mathematical functions, cryptography enables the creation of digital secrets and unforgeable digital signatures. Bitcoin uses elliptic curve multiplication as the basis for its public key cryptography.
In bitcoin, we use public key cryptography to create a key pair that controls access to bitcoins. The key pair consists of a private key and derived from it, a unique public key. The public key is used to receive bitcoins and the private key is used to sign transactions to spend those bitcoins. There is a special relationship between the public key and private key that allows the private key to be used to generate a signature. This signature can be validated against the public key without revealing the private key. When spending bitcoins, the current bitcoin owner presents their public key and a signature (different each time, but created from the same private key, see <<signature>>) in a transaction to spend those bitcoins. Through the presentation of the public key and signature everyone in the bitcoin network can verify and accept that transaction as valid, meaning the person transferring the bitcoin owned them at the time of the transfer.
In bitcoin, we use public key cryptography to create a key pair that controls access to bitcoins. The key pair consists of a private key and derived from it, a unique public key. The public key is used to receive bitcoins, and the private key is used to sign transactions to spend those bitcoins. There is a special relationship between the public key and private key that allows the private key to be used to generate a signature. This signature can be validated against the public key without revealing the private key. When spending bitcoins, the current bitcoin owner presents their public key and a signature (different each time, but created from the same private key, see <<signature>>) in a transaction to spend those bitcoins. Through the presentation of the public key and signature everyone in the bitcoin network can verify and accept that transaction as valid, meaning the person transferring the bitcoin owned them at the time of the transfer.
A +private key+ is simply a number, picked at random. Ownership and control over the private key is the root of user control over all funds associated with the corresponding bitcoin address. The private key is used to create signatures that are required to spend bitcoins, by proving ownership of funds used in a transaction. The private key must remain secret at all times, as revealing it to a third party is equivalent to giving them control over the bitcoins secured by that key. The private key must also be backed up and protected from accidental loss, since if lost it cannot be recovered and the funds secured by it are forever lost too.
A +private key+ is simply a number, picked at random. Ownership and control over the private key is the root of user control over all funds associated with the corresponding bitcoin address. The private key is used to create signatures that are required to spend bitcoins by proving ownership of funds used in a transaction. The private key must remain secret at all times, as revealing it to a third party is equivalent to giving them control over the bitcoins secured by that key. The private key must also be backed up and protected from accidental loss, since if lost it cannot be recovered and the funds secured by it are forever lost too.
Minh T. Nguyen
10 years ago
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