Hi all.
I've looked around for an answer to a very simple question but I can't find anything that's enlightened me.
Am I right in saying that the bitcoin algorithm works something like this? The private key is used to generate the public key which is used to generate the address. This process only works one way. The public key can't be generated from the address and the private key can't be generated from the public key. So practically the private key is all that's needed. The address can be forgotten and regenerated if the private key is still known (and can the public key)?
If I have that right then why the need for three pieces of information? Why can't you just have a key pair and the public key acts as the address?
You are correct! It is so refreshing to have someone research before posting a question!
Now the Bitcoin address is actually calculated by hashing the public key three times. During this process the size is reduced from the size of the public key (512 bits or 257 bits) down to 160 bits and a checksum is added. This is done for three basic reasons:
1) There is an added layer of security. Instead of putting the public key in the blockchain we put the hash of the public key. Given the hash in the very public blockchain it now takes two steps to figure out the private key: hash -> public key -> private key.
2) This reduces the size of the block chain because the hash of the public key is smaller than the public key.
3) If we just used public keys then there would be no checksum. The Bitcoin addresses have a checksum so if you type in an address by hand and make a mistake in one of the characters the address will be detected as invalid and you can be asked to type it in again.
