What Are Private Keys?
When an individual decides to hold bitcoin, there are varying degrees of ownership involved, all of which is the choice of the end user, and all of which has its own implications.
Every bitcoin transaction requires a digital signature. Think of this signature the same as you would a signature used to sign a physical check. When someone signs a check, they are using that check as a message to their respective bank. They are saying I, the account holder, would like to send funds to this other party. In order to validate that the user did initiate this transaction, a physical signature is required on the check. This signature is supposed to be unique to that individual, with the idea being that only their wrist can create their signature in that unique way.
In the Bitcoin ecosystem, when a user would like to send a transaction to another party, a signature is required to complete this transaction — a digital signature.
If an individual has bitcoin, this means that they are holding their money in an address on the Bitcoin network. The address that funds are held in is called a “public address”. If a user would like to send funds to another party, they will need to send these funds from their public address, over to the other party’s public address.
Every public address has a corresponding “private key”. The private key, which is simply a piece of data directly linked to the public address, can most easily be thought of as an individual’s wrist.
When sending a check in the traditional banking world, what makes a person’s signature unique is their wrist creating their signature. When sending bitcoin, a user has to utilize the private key to create the digital signature for this transaction. For every public address, there is only one private key. Meaning that whoever controls a particular private key, can create this signature and send money from the corresponding public address.
While all of these intricacies may sound overwhelmingly complex to simply send and receive money, rest assured, there are software tools available that hide this complexity from the end user.
The varying levels of ownership alluded to in this section boils down to a simple question: “How does a user decide to protect their private keys?”