A public key is a cryptographic code that allows users to receive cryptocurrencies into their accounts. The public key and the private key are the tools required to ensure the security of the crypto economy.
When a user initiates his or her first transaction with Bitcoin for example, a unique pair of a public key and a private key is created. Each of the keys consists of a long string of alphanumeric characters that help to keep a user's holdings secure in the digital ecosystem.
The private key is known to the user alone and serves as the user's digital ID. The private key authorizes the user to spend, withdraw, transfer, or carry out any other transaction from his or her account. A sophisticated algorithm is applied to the private key to generate the public key, and both keys are stored in a digital wallet.
When a transaction is initiated by a user to send to another person, the transaction has to be broadcasted to the network where distributed nodes confirm the validity of the transaction before finalizing it and recoding it on the blockchain.
Before the transaction is broadcast, it is digitally signed using the private key. The signature proves ownership of the private key, although it does not divulge the details of the private key to anyone. Since a public key is fashioned from the private key, the user's public key is used to prove that the digital signature came from his private key. Once the transaction has been verified as valid, the funds are sent to the recipient's public address.
The public address is a hashed version of the public key. Because the public key is made up of an extremely long string of numbers, it is compressed and shortened to from the public address. In effect, the private key generates the public key, which, in turn, generates the public address.