A crypto public key allows for transparency and makes it possible to conduct transactions on an open digital ledger (or a blockchain) without the need for a trusted third party.
Anyone can view or audit the details of a public address — and every transaction on an open ledger has a public key.
Crypto public keys are one piece of a two-part combo necessary to complete a transaction. In order to move crypto from one address to another, a private key (which should only be held and safeguarded by one person) is required.
It’s important to note that there is an interplay between a wallet, a private key, a public key, and an address that makes the decentralized and cryptographically-secure digital asset system possible.
A private key is created when a new wallet is set up. A public key, in turn, is derived from the private key — and both components are necessary to sign transactions. Addresses, which are derived from public keys, are another part of the combo and are used as a means to simplify the sharing of details — or to make it easier to send and receive blockchain-based payments.
Bitcoin and Ethereum use a kind of public key cryptography that is based on the Elliptical Curve Digital Signature Algorithm (ECDSA).
With Bitcoin, public keys are used to sign (or authorize) transactions. On Ethereum, public keys are an important part of signing transactions, but they are also a component of creating smart contracts and decentralized apps.
This is what Bitcoin public keys look like:
All uncompressed Bitcoin public keys start with 04, while compressed public keys start with 02, and then the hexadecimal information following the standard prefix is pointing to a location on the elliptical curve, which is created by the ECDSA mentioned earlier.
In other words, if a blockchain is like a massive new area, then a public address is like a map pinpointing an exact location along with the details about the location.