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Guides

How to Understand Public Key Cryptography

A developer-focused guide to asymmetric cryptography, covering key generation, encryption, digital signatures, and their implementation in blockchain systems like Bitcoin and Ethereum.
Chainscore © 2026
introduction
WEB3 SECURITY

Introduction to Asymmetric Cryptography

Asymmetric cryptography, or public-key cryptography, is the foundational security layer for blockchain networks, enabling secure transactions, digital signatures, and user authentication without shared secrets.

At its core, asymmetric cryptography uses a mathematically linked pair of keys: a public key and a private key. The public key can be freely shared and is often derived into a public address, like an Ethereum 0x... address. The private key is a secret number known only to the owner. Any data encrypted with one key can only be decrypted by its paired key. This one-way relationship is based on computationally hard mathematical problems, such as integer factorization (RSA) or discrete logarithms (ECDSA).

In blockchain, this system enables two critical functions. First, digital signatures: a user signs a transaction with their private key, and anyone can verify its authenticity using the corresponding public key, proving the signer's identity without revealing the secret. Second, secure communication: you can encrypt a message with someone's public key, ensuring only the holder of the paired private key can decrypt it. This is how protocols like PGP and TLS work, forming the basis for secure connections to RPC endpoints and wallets.

The most common algorithm in Web3 is the Elliptic Curve Digital Signature Algorithm (ECDSA), used by Bitcoin and Ethereum. A private key in this system is a random 256-bit integer. The public key is a point on a specific elliptic curve (like secp256k1) generated from the private key. The security relies on the extreme difficulty of deriving the private key from the public key, a problem known as the Elliptic Curve Discrete Logarithm Problem (ECDLP).

Here's a conceptual code snippet illustrating key generation and signing using the ethereum-cryptography library in JavaScript:

javascript
import { secp256k1 } from 'ethereum-cryptography/secp256k1';
import { toHex } from 'ethereum-cryptography/utils';
// Generate a random private key (32 bytes)
const privateKey = secp256k1.utils.randomPrivateKey();
console.log('Private Key:', toHex(privateKey));
// Derive the public key from the private key
const publicKey = secp256k1.getPublicKey(privateKey);
console.log('Public Key:', toHex(publicKey));
// Sign a message hash
const messageHash = new Uint8Array(32).fill(1); // Example hash
const signature = secp256k1.sign(messageHash, privateKey);
console.log('Signature:', signature);

Understanding this key pair is essential for wallet security. Your private key is your ultimate control mechanism—losing it means losing access to your assets, as there is no central recovery service. Your public key and its derivatives (addresses) are your on-chain identity. This architecture enables trustless verification; the network can cryptographically verify that you authorized a transaction without needing to know who you are, which is a cornerstone of blockchain's permissionless nature.

While ECDSA is prevalent, newer systems like EdDSA (used in ZK-proof systems and some Layer 2s) and BLS signatures (used for efficient aggregation in Ethereum's consensus) offer different trade-offs in speed, signature size, and aggregation capabilities. The choice of algorithm directly impacts a network's scalability, security assumptions, and gas costs for signature verification in smart contracts.

prerequisites
PREREQUISITES AND MATHEMATICAL FOUNDATION

How to Understand Public Key Cryptography

Public key cryptography is the mathematical foundation for digital signatures, blockchain wallets, and secure communication. This guide explains its core concepts, the underlying math, and how it enables trustless systems.

Public key cryptography, or asymmetric cryptography, uses a pair of mathematically linked keys: a public key and a private key. The private key is a secret number known only to the owner, while the public key can be shared openly. A message encrypted with the public key can only be decrypted with the corresponding private key. Conversely, a digital signature created with the private key can be verified by anyone using the public key. This one-way relationship is the basis for secure transactions on blockchains like Bitcoin and Ethereum, where your public address is derived from your public key.

The security of this system relies on trapdoor functions—mathematical operations that are easy to compute in one direction but extremely difficult to reverse without a secret. The most common example is the multiplication of large prime numbers versus factoring. It's trivial to multiply two large primes (e.g., p and q) to get a product N. However, given only N, deducing the original primes p and q is computationally infeasible for sufficiently large numbers. This forms the basis of the RSA algorithm. In blockchain, the Elliptic Curve Digital Signature Algorithm (ECDSA) is more prevalent, using the discrete logarithm problem on elliptic curves as its trapdoor function.

Let's examine the core operations. Key Generation creates the key pair. Encryption uses a recipient's public key to scramble data. Decryption uses the recipient's private key to unscramble it. Signing uses a sender's private key to generate a unique signature for a piece of data. Verification uses the sender's public key to confirm the signature's authenticity. In code, generating an ECDSA key pair in Python with the ecdsa library looks like this:

python
from ecdsa import SigningKey, SECP256k1
private_key = SigningKey.generate(curve=SECP256k1)  # Secret
public_key = private_key.verifying_key               # Public

The SECP256k1 curve is the standard used by Bitcoin and Ethereum.

In blockchain, you rarely encrypt data. Instead, you sign transactions. When you send ETH, your wallet software creates a transaction hash and signs it with your private key. The network nodes then use your public key (derived from your sending address) to verify the signature. This proves you own the private key without revealing it. The public key is often hashed (using Keccak-256 for Ethereum) to create a shorter, public-facing address. This means your address is a cryptographic representation of your public key, which itself is derived from your secret private key.

Understanding this hierarchy is crucial for security. Your private key is the ultimate secret—lose it, and you lose access to your assets; expose it, and anyone can control them. The public key can be shared to receive verifiable signatures or encrypted messages. The public address is a hashed version of the public key used as an identifier on-chain. Tools like Bitcoin's BIP32 and BIP39 standards allow a single seed phrase (mnemonic) to deterministically generate vast hierarchies of private keys and addresses for different blockchains.

To practically explore this, use a library in your preferred language. For JavaScript/Node.js, use ethers.js or @noble/curves. For Python, use ecdsa or coincurve. Always use audited, standard libraries for cryptographic operations—never roll your own cryptography. Test with known values: sign a message, verify it, and ensure you can derive the correct Ethereum address from a public key. This hands-on practice solidifies the abstract relationship between the private key, public key, and address, forming the bedrock for all subsequent blockchain development.

key-concepts-text
PUBLIC KEY CRYPTOGRAPHY

Core Concepts: Key Pairs, Encryption, and Signatures

Public key cryptography is the mathematical foundation for secure communication and digital ownership in Web3. This guide explains its core components: key pairs, encryption, and digital signatures.

At its core, public key cryptography uses a pair of mathematically linked keys: a public key and a private key. The public key can be freely shared and is often derived into a public address, like an Ethereum 0x... address. The private key must be kept secret, as it is the ultimate proof of ownership. The magic lies in their one-way relationship: anything encrypted with the public key can only be decrypted with its corresponding private key, and a signature created with the private key can be verified by anyone using the public key. This asymmetry enables secure systems without a pre-shared secret.

Encryption uses this key pair to protect data confidentiality. If Alice wants to send a private message to Bob, she encrypts it using Bob's public key. Only Bob, with his private key, can decrypt and read the message. This is fundamental for secure communication channels. In contrast, digital signatures are used to verify authenticity and integrity. To sign a transaction, a user generates a cryptographic hash of the data and signs this hash with their private key. Anyone can then use the signer's public key to verify that the signature is valid and that the data has not been altered, proving the transaction's origin.

The most common algorithm for generating these key pairs is the Elliptic Curve Digital Signature Algorithm (ECDSA), used by Bitcoin and Ethereum. A specific curve, secp256k1, defines the mathematical group. The private key is a randomly generated 256-bit integer. The public key is a point on the elliptic curve derived from the private key through scalar multiplication. This derivation is computationally easy, but reversing the process—finding the private key from the public key—is practically impossible due to the Elliptic Curve Discrete Logarithm Problem (ECDLP).

In practice, you rarely handle raw private keys. Instead, you use a mnemonic phrase or seed phrase (e.g., 12 or 24 words), which is run through a key derivation function to generate a hierarchy of deterministic key pairs. This is defined by standards like BIP-39 and BIP-44. Tools like the ethers.js library handle this complexity. For example, creating a random wallet and extracting its keys is straightforward:

javascript
const { ethers } = require("ethers");
const wallet = ethers.Wallet.createRandom();
console.log("Address:", wallet.address); // Derived from public key
console.log("Public Key:", wallet.publicKey);
console.log("Private Key:", wallet.privateKey); // Keep secret!

Understanding this separation is critical for security. Your public address is for receiving assets. Your public key may be exposed when you sign transactions. Your private key (or mnemonic) is the master key to your digital vault; its compromise means total loss of control. Signatures do not reveal the private key, but key management is paramount. Use hardware wallets or properly audited libraries to handle signing operations, never exposing the private key to the internet. This cryptographic foundation enables trustless ownership and verification across all blockchain networks.

how-it-works
CORE CONCEPT

How Public Key Cryptography Works

Public key cryptography is the foundation of blockchain security, enabling digital signatures, encryption, and wallet addresses. This guide explains the core components and their practical applications in Web3.

01

Public and Private Keys

A private key is a secret, randomly generated 256-bit number that proves ownership. The corresponding public key is derived from it using elliptic curve multiplication. This is a one-way function; you cannot reverse-engineer the private key from the public key. In blockchain, your wallet address is a hashed version of your public key.

  • Private Key: 0xac0974bec39a17e36ba4a6b4d238ff944bacb478cbed5efcae784d7bf4f2ff80 (Example from Hardhat)
  • Public Key: Derived via the secp256k1 elliptic curve.
  • Address: The last 20 bytes of the keccak256 hash of the public key.
02

Digital Signatures (ECDSA)

The Elliptic Curve Digital Signature Algorithm (ECDSA) is used to sign transactions. The private key creates a signature, and the public key verifies it without revealing the secret.

Process:

  1. A hash of the transaction data is created.
  2. The private key, the hash, and a random number (k) generate a signature (r, s).
  3. The network uses the sender's public key, the hash, and the signature to verify authenticity.

This ensures non-repudiation and integrity. A single bit change in the transaction results in a completely different, invalid signature.

03

Elliptic Curve Cryptography

Blockchains like Bitcoin and Ethereum use the secp256k1 elliptic curve, defined by the equation y² = x³ + 7. Operations are performed over a finite field of prime order.

Key Properties:

  • Discrete Log Problem: Finding k in Q = k * G (where G is the generator point and Q is the public key) is computationally infeasible.
  • Deterministic: The same private key always generates the same public key.
  • Efficiency: Provides strong security with relatively short keys (256-bit private key, 512-bit public key).

This mathematical foundation makes brute-force attacks on keys practically impossible.

04

Key Derivation & Wallets

Wallets manage keys and derive addresses. Hierarchical Deterministic (HD) Wallets, defined by BIP-32/44, use a single seed phrase to generate a tree of keys.

Process:

  • A 12-24 word mnemonic seed (BIP-39) generates a 512-bit seed.
  • This seed creates a master private key and chain code.
  • Child keys are derived for different accounts/chains (e.g., m/44'/60'/0'/0/0 for Ethereum first account).

Formats: Private keys are often stored as encrypted Keystore files (e.g., UTC JSON) with a password, not as plaintext.

06

Security Best Practices

Never expose your private key. Treat it like the password to your bank account.

  • Use HD Wallets: A seed phrase backs up all derived keys.
  • Hardware Wallets: Store keys offline on devices like Ledger or Trezor.
  • Audit Signatures: DApps request signatures for transactions; verify the data hash you are signing.
  • Key Rotation: For high-value accounts, consider generating new keys periodically.
  • Secure Storage: Use hardware security modules (HSMs) or encrypted cloud vaults for institutional keys, never plaintext files.

Remember: Transactions on-chain are immutable. A stolen key means lost funds.

explanation-rsa
CRYPTOGRAPHY FOUNDATIONS

RSA: The Integer Factorization Approach

A practical guide to understanding the mathematics and mechanics behind the RSA public-key cryptosystem, which secures much of modern digital communication.

The RSA cryptosystem, named for its creators Rivest, Shamir, and Adleman, is a foundational public-key cryptography algorithm. It enables secure data transmission by using a pair of keys: a public key for encryption and a private key for decryption. Its security relies on the computational difficulty of factoring the product of two large prime numbers. This integer factorization problem is considered intractable for classical computers when the primes are sufficiently large, forming the core of RSA's one-way function.

The algorithm works through a series of mathematical steps. First, two distinct large prime numbers, p and q, are chosen and kept secret. Their product, n = p * q, is the modulus and is public. Next, a public exponent e is chosen, typically 65537, which is coprime to φ(n) = (p-1)(q-1). The private exponent d is then computed as the modular multiplicative inverse of e modulo φ(n), satisfying e * d ≡ 1 mod φ(n). The public key is the pair (n, e), while the private key is (n, d).

Encryption and decryption are modular exponentiation operations. To encrypt a message m (represented as an integer less than n), compute the ciphertext c = m^e mod n. To decrypt, the recipient uses their private key: m = c^d mod n. This works due to Euler's theorem, which ensures that (m^e)^d ≡ m mod n. The security guarantee is that while computing c from m and (n, e) is easy, deriving m from c without knowing d is believed to require factoring n to discover p and q, and thus φ(n).

A practical implementation in Python highlights these steps. The following code snippet demonstrates key generation, encryption, and decryption using small primes for clarity. In production, primes are typically 1024 to 4096 bits long.

python
import random
from math import gcd

def modinv(a, m):
    # Extended Euclidean Algorithm
    def egcd(a, b):
        if b == 0:
            return (1, 0, a)
        x1, y1, g = egcd(b, a % b)
        return (y1, x1 - (a // b) * y1, g)
    x, _, g = egcd(a, m)
    return x % m if g == 1 else None

# 1. Key Generation (with small primes)
p, q = 61, 53  # Must be kept secret
n = p * q  # 3233
phi = (p-1) * (q-1)  # 3120
e = 17  # Common public exponent, coprime to phi
d = modinv(e, phi)  # 2753, the private exponent
public_key = (n, e)  # (3233, 17)
private_key = (n, d)  # (3233, 2753)

# 2. Encryption
m = 65  # Plaintext as integer
c = pow(m, e, n)  # Ciphertext: 2790

# 3. Decryption
decrypted = pow(c, d, n)  # Result: 65
print(f'Decrypted: {decrypted}')

RSA's real-world applications are vast, underpinning protocols like TLS/SSL for HTTPS, SSH for secure shell access, and PGP/GPG for email encryption. It is also used for digital signatures, where the operations are reversed: a message is signed with the private key and verified with the public key. However, RSA has limitations: it is computationally intensive compared to symmetric cryptography and vulnerable to attacks if implemented incorrectly—such as using weak random number generators for p and q or a poorly chosen e.

The future of RSA is challenged by quantum computing. Shor's algorithm, if run on a sufficiently powerful quantum computer, could factor large integers in polynomial time, breaking RSA's security assumption. This has spurred the development of post-quantum cryptography (PQC). Despite this threat, RSA remains a critical, well-understood standard. For developers, understanding its integer factorization basis is essential for implementing secure systems and evaluating the trade-offs involved in cryptographic algorithm selection.

explanation-ecc
PUBLIC KEY CRYPTOGRAPHY

Elliptic Curve Cryptography (ECC) and ECDSA

A technical guide to the mathematical foundations of blockchain security, from elliptic curve operations to digital signatures.

Elliptic Curve Cryptography (ECC) is a public-key cryptographic system based on the algebraic structure of elliptic curves over finite fields. Unlike RSA, which relies on the difficulty of factoring large integers, ECC's security stems from the Elliptic Curve Discrete Logarithm Problem (ECDLP). This problem involves finding the integer k (a private key) given a starting point G (a generator) and a resulting point k*G (a public key) on the curve. The asymmetry—where deriving the public key from the private key is easy, but the reverse is computationally infeasible—forms the bedrock of modern blockchain security for wallets and transactions.

The Elliptic Curve Digital Signature Algorithm (ECDSA) is the specific algorithm that uses ECC to create and verify digital signatures. It enables a user to prove ownership of a private key without revealing it. The process involves: 1) generating a cryptographic hash of the message, 2) creating a signature using the private key and this hash, and 3) allowing anyone to verify the signature's validity using the corresponding public key and the original message. This is how transactions on networks like Bitcoin and Ethereum are authorized; your signature proves you control the funds.

In practice, blockchain protocols use standardized elliptic curves. Bitcoin, Ethereum, and many others use the secp256k1 curve. A private key is simply a randomly generated 256-bit integer. The corresponding public key is a point on the secp256k1 curve derived by multiplying the generator point G by the private key. This public key is then hashed (using Keccak-256 for Ethereum, RIPEMD-160(SHA-256()) for Bitcoin) to create the public address you share. The security of billions of dollars in digital assets rests on the mathematical guarantee that deriving the private key from this public address is impossible with current technology.

Here is a simplified Python example using the ecdsa library to demonstrate key generation and signing:

python
import ecdsa
import hashlib
# Generate a private key (for demonstration, using secp256k1)
private_key = ecdsa.SigningKey.generate(curve=ecdsa.SECP256k1)
# Derive the corresponding public key
public_key = private_key.get_verifying_key()
# Create a message hash
message = b"Transaction for 1 ETH"
message_hash = hashlib.sha256(message).digest()
# Sign the hash with the private key
signature = private_key.sign(message_hash)
# Verify the signature with the public key
assert public_key.verify(signature, message_hash)
print("Signature is valid.")

This illustrates the core flow, though production systems involve more stringent random number generation and serialization.

Understanding ECC and ECDSA is crucial for developers working with blockchain protocols, smart contracts, or wallet infrastructure. It explains why a seed phrase can regenerate a wallet (it's the entropy for the private key), how multi-signature schemes are constructed, and the fundamental reason why protecting your private key is paramount. For further reading, the technical specifications for secp256k1 and RFC 6979 on deterministic ECDSA are essential resources.

ALGORITHM BREAKDOWN

RSA vs. ECC: A Technical Comparison

Key differences between RSA and Elliptic Curve Cryptography for public key operations.

FeatureRSAElliptic Curve Cryptography (ECC)

Underlying Mathematical Problem

Integer Factorization (RSA problem)

Elliptic Curve Discrete Logarithm Problem (ECDLP)

Key Size for ~128-bit Security

3072 bits

256 bits

Signature Size (approx.)

384 bytes (RSA-3072)

64 bytes (ECDSA P-256)

Computational Efficiency (Sign/Verify)

Slower

Faster

Standardization & Adoption

Extremely high (PKCS#1, SSL/TLS legacy)

High (NIST curves, modern TLS 1.3, Bitcoin/Ethereum)

Quantum Resistance

Common Use Cases

SSL/TLS certificates, legacy systems, PGP

Blockchain signatures, modern TLS, mobile/WoT, DNSSEC

use-cases
PUBLIC KEY CRYPTOGRAPHY

Use Cases in Blockchain and Web3

Public key cryptography is the foundation of blockchain security. This guide explains its core applications, from securing wallets to enabling trustless transactions.

02

Transaction Signing & Verification

When you send a transaction, you sign it with your private key, creating a unique digital signature. The network nodes verify this signature using your public key without ever seeing the private key. This process ensures:

  • Authenticity: The transaction came from the legitimate owner.
  • Integrity: The transaction data was not altered after signing.
  • Consensus: Valid signatures are a prerequisite for a transaction to be included in a block on networks like Bitcoin and Ethereum.
05

Encrypting Off-Chain Data

While blockchain data is public, sensitive information can be encrypted using a recipient's public key. Only the holder of the corresponding private key can decrypt it. This is used in:

  • Private messaging on platforms like Status or XMTP.
  • Secure data sharing for decentralized identity credentials.
  • Confidential transactions on networks like Secret Network or Aztec, where asset amounts and types are hidden using zk-SNARKs and similar zero-knowledge proofs that rely on cryptographic key pairs.
deep-dive-wallets
PUBLIC KEY CRYPTOGRAPHY

Deep Dive: From Private Key to Blockchain Address

This guide explains the cryptographic journey that transforms a secret private key into a public blockchain address, the foundation of digital asset ownership.

At the core of every blockchain wallet is a private key, a 256-bit (32-byte) cryptographically secure random number. This key is the ultimate secret; whoever possesses it controls the associated assets. From this private key, a corresponding public key is mathematically derived using Elliptic Curve Cryptography (ECC), specifically the secp256k1 curve. The key property is that the public key can be easily computed from the private key, but the reverse operation is computationally infeasible, forming the basis of asymmetric cryptography.

The derived public key is a point on the elliptic curve, typically represented as a 65-byte uncompressed coordinate (0x04 + X + Y) or a 33-byte compressed format. To create a shorter, more manageable identifier, this public key is hashed. For Bitcoin and Ethereum, this involves a two-step process: first, the SHA-256 hash algorithm is applied to the public key bytes, then the RIPEMD-160 algorithm hashes that result, producing a 160-bit (20-byte) public key hash. This hash significantly shortens the address and adds a layer of security.

The final blockchain address is created by encoding this public key hash. For Bitcoin, a version byte (e.g., 0x00 for mainnet) is prepended, checksummed using double SHA-256, and the result is encoded in Base58Check. Ethereum simplifies this: it takes the last 20 bytes of the Keccak-256 hash of the uncompressed public key and prefixes it with 0x. This yields the familiar 42-character hexadecimal address like 0x742d35Cc6634C0532925a3b844Bc9e.... This entire deterministic process ensures that a single private key always maps to one unique, publicly shareable address.

PUBLIC KEY CRYPTOGRAPHY

Frequently Asked Questions

Common developer questions about public key cryptography, covering key generation, wallet addresses, security, and practical implementation details.

These are three distinct cryptographic components in a hierarchical relationship.

  • Private Key: A 256-bit (32-byte) secret number, typically represented as a 64-character hex string. This is the ultimate secret that proves ownership and must never be shared. It's used to sign transactions.
  • Public Key: A 64-byte (uncompressed) or 33-byte (compressed) point on an elliptic curve, derived from the private key using Elliptic Curve Cryptography (ECC). It can be shared publicly and is used to verify signatures.
  • Wallet Address: A shorter, human-readable identifier derived from the public key, most commonly a 20-byte Ethereum address. It's created by hashing the public key with Keccak-256 and taking the last 20 bytes, then prefixing it with 0x.

Think of it as: Private Key (secret) → Public Key (mathematical derivative) → Wallet Address (hashed derivative).

conclusion
KEY TAKEAWAYS

Conclusion and Security Best Practices

Public key cryptography is the bedrock of Web3 security, enabling trustless ownership and verification. This guide concludes with essential practices for developers and users.

Understanding the core components—asymmetric key pairs, digital signatures, and cryptographic hashing—is fundamental. A user's private key is the ultimate secret that proves ownership of assets and identity on-chain, while the derived public key and public address serve as public identifiers. The irreversible nature of the keccak256 hash function and the Elliptic Curve Digital Signature Algorithm (ECDSA) with the secp256k1 curve ensure that forging a signature is computationally infeasible. This mathematical foundation underpins every wallet interaction, from signing a transaction to verifying a smart contract call.

For developers, security begins with proper key management. Never store private keys or mnemonics in code repositories, client-side code, or environment variables accessible to the frontend. Use dedicated key management services or hardware security modules (HSMs) for backend operations. When implementing signing, rely on audited libraries like ethers.js, web3.js, or @noble/curves. Always verify signatures on-chain using OpenZeppelin's ECDSA library or native functions like ecrecover in Solidity to prevent signature malleability and replay attacks. Treat every piece of user-provided data as untrusted until cryptographically verified.

Users must prioritize self-custody hygiene. This means using a hardware wallet (Ledger, Trezor) for significant holdings, never sharing seed phrases or private keys, and verifying transaction details before signing. Be wary of phishing sites asking to connect your wallet; always check the URL. Understand that signing a message is not the same as sending a transaction—both actions require private key access but have different implications. Regularly audit connected dApp permissions in your wallet and revoke unnecessary allowances using tools like Revoke.cash.

On-chain, implement security best practices such as using checks-effects-interactions patterns, protecting against reentrancy, and incorporating timelocks for privileged functions. For multisignature wallets or DAOs, define clear signing thresholds and use audited contracts like Gnosis Safe. Remember that while the cryptography is robust, the surrounding infrastructure—browsers, random number generation, and physical security—can be vulnerable. Security is a layered approach combining cryptographic guarantees with operational vigilance.

The evolution of cryptography continues with account abstraction (ERC-4337) and passkeys, which aim to improve user experience without sacrificing security. However, the principles remain: the private key's secrecy is paramount. By combining a deep technical understanding of public key cryptography with rigorous operational practices, developers and users can navigate Web3 with greater confidence and security.

How to Understand Public Key Cryptography for Developers | ChainScore Guides