Understanding Public and Private Keys in Blockchain: Signing, Verification, Encryption, and Decryption

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Blockchain technology relies heavily on cryptographic principles to ensure security, authenticity, and integrity. At the heart of this system are public and private keys, which enable core operations such as digital signing, signature verification, encryption, and decryption. This article explores these mechanisms in depth, focusing on their practical implementation within blockchain networks—particularly those using ECDSA (Elliptic Curve Digital Signature Algorithm), like Bitcoin.

Whether you're new to cryptography or looking to deepen your understanding of blockchain security, this guide breaks down complex processes into clear, digestible concepts—without diving into low-level mathematical implementations.

Public Key and Private Key: The Foundation of Blockchain Security

In blockchain systems like Bitcoin, ECDSA is used for digital signatures—an asymmetric cryptographic method where each user has a public key and a private key pair.

These keys are mathematically linked but serve different purposes:

The relationship between the two is one-way: you can derive the public key from the private key, but not vice versa. This ensures that even if someone knows your public key, they cannot reverse-engineer your private key—a cornerstone of blockchain security.

👉 Learn how blockchain wallets use public and private keys securely.

Encryption and Decryption Using Asymmetric Cryptography

While blockchains primarily use asymmetric cryptography for signing transactions rather than encrypting large amounts of data, understanding the encryption process helps clarify how secure communication works in decentralized systems.

Key Setup and Definitions

Let’s define the components involved:

Note: The operation k * G refers to scalar multiplication on an elliptic curve, which is computationally easy in one direction but extremely difficult to reverse—this is known as the elliptic curve discrete logarithm problem.

Encryption Process

Here’s how a message can be encrypted using public-key cryptography:

  1. Generate a Message Digest:
    Compute Digest = G * X, where X is a random number chosen by the sender.
  2. Encrypt the Message:
    Calculate Encryption = K * X + Message, where K is the recipient’s public key.
  3. Send Encrypted Data:
    Transmit both the Digest and the Encryption result to the recipient.

This method ensures that only someone with knowledge of the corresponding private key can recover the original message.

Decryption Process

Only the holder of the private key can decrypt the message. Here's how:

Message = Encryption - k * Digest
        = Encryption - k * (G * X)
        = Encryption - (k * G) * X
        = Encryption - K * X

Since the recipient knows their own private key k, they can reconstruct K * X and subtract it from the encrypted message to retrieve the original content.

This demonstrates the power of asymmetric encryption: secure communication without pre-shared secrets.

Digital Signatures and Signature Verification

In blockchain, digital signatures are crucial for proving ownership and authorizing transactions. Unlike encryption, which protects data confidentiality, signing ensures authenticity and non-repudiation.

When you send cryptocurrency, you sign the transaction with your private key. The network verifies it using your public key—without ever exposing your secret.

Setup for Signing

We use similar variables as before:

Signing Process

To create a valid digital signature:

  1. Generate a Temporary Public Key:
    Calculate R = r * G. This point on the curve becomes part of the signature.

  2. Compute the Signature:
    Using the hash of the message (hash) and the temporary key r, compute:
    S = r⁻¹ * (hash + k * R_x) mod n
    Where:

    • r⁻¹ is the modular inverse of r
    • R_x is the x-coordinate of point R
    • n is the order of the elliptic curve group
  3. Transmit Signature Components:
    Send the message along with (R, S)—the two parts of the signature—to the verifier.

This process ensures that each signature is unique and secure, even if the same message is signed multiple times (due to a new random r each time).

👉 Discover how digital signatures protect blockchain transactions.

How Signature Verification Works

Verification confirms that:

Verification Steps

Given:

The verifier computes:

  1. u = S⁻¹ * hash mod n
  2. v = S⁻¹ * R_x mod n
  3. Recompute a point: P = u * G + v * K

Then check whether the x-coordinate of P equals R_x. If so, the signature is valid.

Why does this work? Because if the signature was created with the correct private key k, then P will naturally resolve to a point whose x-coordinate matches R.

This elegant mechanism allows anyone on the network to verify authenticity without knowing any secrets.

Frequently Asked Questions (FAQ)

What’s the difference between encryption and digital signing?

Encryption protects data from unauthorized access; only the intended recipient can decrypt it. Digital signing proves identity and integrity—anyone can verify it, but only the private key holder can produce it.

Can someone steal my cryptocurrency if they have my public key?

No. Your public key can be safely shared—it’s used only for verification or receiving funds. Theft occurs only if your private key is exposed.

Is ECDSA secure?

Yes, ECDSA is currently considered secure when implemented correctly. However, poor randomness in generating r can lead to private key exposure—a known vulnerability in early Bitcoin wallets.

Do all blockchains use ECDSA?

Most do, including Bitcoin and Ethereum. However, newer systems may use alternatives like EdDSA (e.g., Solana uses Ed25519) for improved performance and security.

Can I reuse my private key across blockchains?

Technically yes—but not recommended. Using one private key across networks increases risk. Use separate wallets for better security hygiene.

How are private keys stored securely?

Best practices include hardware wallets, encrypted storage, and mnemonic phrases (BIP39). Never store private keys in plain text or online services.

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By now, you should have a solid grasp of how public-key cryptography enables trustless, secure interactions in blockchain systems. From signing transactions to verifying authenticity, these cryptographic primitives form the backbone of decentralized innovation.

Understanding them empowers you to make informed decisions—whether you're building on blockchain or simply using it.