Basics of Sending/Receiving Cryptocurrency Funds

The process behind how funds are sent and received from one digital wallet to another is quite simple. Let’s think of a scenario where we have two people that are trying to transfer digital funds from one to the other.

John just received a piece of furniture from Jill and the two decided to settle their funds by exchanging cryptocurrency. The first thing that both John and Jill must do is exchange their own public keys with each other. John give’s his public key for his digital wallet to Jill and Jill give’s her public key for her digital wallet to John. Now John can create a digital message that contains the specific amount of digital currency he is planning on paying Jill for the piece of furniture.

John creates the message using his digital wallet software and then encrypts the message with Jill’s public key. John then sends the message to Jill who now uses her private key to decrypt the message and receive the funds in her digital wallet. Jill is the only one who can decrypt the message because only she has the private key. Even John would not be able to decrypt the message he creates because his private key would not match the public key used to encrypting the message.

Remember that everyone who possesses a digital wallet has a private and public key that are mathematically linked to each other. This process is called asymmetric encryption and its strength and security depends on John and Jill keeping their private keys secure and protected. If a hacker found Jill’s private key, the hacker would then be able to decrypt any messages sent to Jill compromising the security of her digital wallet.

In short, what’s most important to remember are three main points in the process of sending and receiving funds with digital wallets. The very first point is that a public key are used to encrypt data and only a matching private key can decrypt that data. Second, to be able to spend digital assets, your wallet’s private key must match the public address the digital asset is assigned to. Finally, if both public and private key’s match, the balance of your digital wallet will increase, and the senders decrease.

Author: blckchainexplain