Private Keys, Signatures, and Seed Phrases

What you'll learn

• The Key to Everything
• How Asymmetric Cryptography Works
• Seed Phrases: Human-Readable Keys
• The #1 Causes of Loss (Real Data)
• For Deeper Reading

Key terms

Private key

A 256-bit secret number that proves ownership of cryptocurrency and authorizes transactions. Bitcoin uses elliptic curve cryptography (secp256k1).

Public key

A number derived from the private key via elliptic curve point multiplication. Can be shared publicly; used to verify signatures and generate addresses.

Address

A hash of the public key, typically encoded as a 26-35 character string. The "destination" you send crypto to. Bitcoin addresses start with 1, 3, or bc1; Ethereum with 0x.

Seed phrase / mnemonic

A list of 12-24 common English words that encodes a master key (BIP-39 standard). Anyone with the phrase has full control over derived addresses.

BIP-39

Bitcoin Improvement Proposal 39, published September 2013. The standard for mnemonic seed phrases used by most wallets across many cryptocurrencies.

BIP-44 / HD wallet

Hierarchical Deterministic wallet standard. Allows one seed phrase to derive private keys for many cryptocurrencies and many addresses on each.

Self-custody

Holding your own private keys rather than trusting an exchange or third party. Captured in the phrase "not your keys, not your coins" by Andreas Antonopoulos.

ECDSA / Schnorr signatures

Digital signature algorithms used by Bitcoin (ECDSA originally; Schnorr added with Taproot Nov 2021). Both prove a transaction was authorized by the private key holder.

Phishing

Fraud attempts to steal information by impersonating legitimate websites, emails, or people. Single largest source of crypto loss.

Address poisoning

An attack where attackers send 0-value transfers from addresses matching your contacts' first/last characters, hoping you copy the wrong address from history.

SIM swapping

An attack where the attacker transfers your phone number to a SIM they control, then uses SMS-based 2FA recovery to take over accounts. Michael Terpin won $75.8M judgment for one such case.

Shamir Secret Sharing (SSS) / SLIP-39

A cryptographic technique (1979, Adi Shamir) for splitting a secret into n shares with threshold m. Any m shares reconstruct the secret; fewer reveal nothing. SLIP-39 is the Trezor standard implementation.