Blockchain Wallet Technology Explained (Part 2): Address Creation & Digital Signatures

How Are Private Keys, Public Keys, and Seed Phrases Generated? How Are Messages Transmitted?

This article explores the technical principles behind blockchain wallets, focusing on:

1. Creating private keys and addresses
2. Message transmission mechanisms

Creating Private Keys and Addresses

Step-by-Step Process

Generating a blockchain address involves three key outputs:

1. Private Key: A cryptographically secure random number (256-bit) generated using SHA-256.
2. Public Key: Derived from the private key via Elliptic Curve Cryptography (ECC).
3. Address: Produced by hashing the public key (SHA-256 + encoding).

Key Properties:

• The process is one-way: Public keys cannot reverse-engineer private keys; addresses cannot reveal public keys.
• This ensures wallet security even when public keys/addresses are exposed on the blockchain.

👉 Explore how wallets generate secure keys

Variations in Address Formats

Different blockchains (or even updates within the same chain) may use distinct address protocols. Examples:

• Bitcoin: Multiple formats (Legacy 1..., SegWit 3..., Native SegWit bc1...).
• Ethereum: Always starts with 0x.

Wallet Adaptation:
A single public key can generate multiple addresses under different protocols.

Transmitting Messages

Blockchains rely on decentralized peer-to-peer (P2P) networks. To ensure integrity and authenticity:

1. Cryptographic Hash Functions

• Purpose: Verify message completeness (e.g., transaction details).

• Process:

  • Sender hashes the message into a digest.
  • Receiver rehashes the message and compares digests.
• Limitation: Detects tampering but not impersonation.

2. Digital Signatures

• Purpose: Authenticate the sender (prevent spoofing).

• Process:

  • Sender signs the message with their private key.
  • Receiver verifies the signature using the sender’s public key.

Example:
A transaction like "Alice sends 1 BTC to Bob" requires Alice’s digital signature to prove authorization.

FAQs

Q1: Can someone steal my funds if they know my public key?

A: No. Public keys cannot reverse-engineer private keys. Funds are only accessible with the private key.

Q2: Why do some blockchains have multiple address formats?

A: Protocol upgrades (e.g., Bitcoin’s SegWit) introduce new formats while maintaining backward compatibility.

Q3: How does a digital signature prevent fraud?

A: It mathematically ties the transaction to the sender’s private key, making forgery impossible.

👉 Learn more about wallet security

Final Notes:

• Always back up your seed phrase—it’s the ultimate recovery tool.
• Address formats vary, but the underlying cryptography remains universally secure.

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