Monday, June 30, 2014

Bitcoin Core Ideas – Public Keys


I found Bitcoin really obtuse even as I learned more and more about it. I understood bitcoin much more easily once I related each core idea to one which I already knew. Once I understood the core ideas underpinning Bitcoin, I realized this stuff will change the world.

Account Numbers


I get account numbers. Each time I have an interaction with a bank, it is associated with an account number. Account numbers allow both myself and the bank to identify a block of financial information, and keep track of it over time. Account numbers also allow third parties to transfer money into a given account. Account numbers can also allow confirmation of funds availability.

Account Number
023452846
  • Identify Financial Data
  • Allow Deposits Into Data
  • Confirmation of Funds


Account numbers are used in place of my name because I may have more than one account with a given bank, in turn, the bank may have more than one customer with a given name. Account numbers allow flexibility for me to hold many accounts to track my various financial business such as savings, loans, checking, credit, etc.

In the United States, my accounts are linked directly to my personal or business identity. In Switzerland account numbers can be held in anonymity with no connection to a person or entity.

Knowledge of an account number does not allow spending or manipulation of a given account. In banking, passwords, PIN numbers, identification, and signatures provide the locking mechanism on the use of data in any given account.

Public Keys


In the world of Bitcoin, account numbers are called Public Keys. Just like with a bank, a public key identifies a block of financial information, allows third party deposits, and allows for confirmation of funds availability.

Public Key
1H7vmqxqA785FFH3H1FL8JH1bTi5xPDqVv
  • Identify Financial Data
  • Allow Deposits Into Data
  • Confirmation of Funds



Public keys are completely free to create and to keep. (I created the key above just for this example.) Like account numbers in Switzerland, Bitcoin public keys can be anonymous. In fact, since Bitcoin does not use a central bank, there is no list of who owns what public key.

Unique to Bitcoin public keys, all financial data of a given public key is completely transparent.  Anyone on earth can see the balance, and transaction activities of any given key. Anonymity is achieved by having every single key available at all times, yet no database to connect any given key to any specific user.

Similar to banking accounts, knowledge of a public key address does not allow spending or manipulation of a given account. With Bitcoin, private keys provide the locking mechanism on the use of data held by the public key. (Private keys is a core idea for another day.)


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