One problem with many cryptographic algorithms is that they require the distribution of shared keys. A password is a good example of a shared key. The problem with shared keys is that they must be shared between communicating entities before secure communication can start. The sharing process, however, can be vulnerable to eavesdropping, which leads to a chicken-and-egg problem: before we can exchange data securely, we must first exchange secret keys securely.

This problem was solved in 1976 by Whitfield Diffie and Martin Hellman, with the creation of public key cryptography. In the Diffie-Hellman public-key system each communicating party holds a pair of keys -- one public and one private. The private key is known only to the communicating party, while the public key can be given to anyone. Data encrypted using one of the keys can only be decrypted with the other.

Thus, if you want to create a message to be read only by a particular party, you use their public key to make the encryption, and they then use their private key to decrypt the message.

Likewise, if you encrypt a message with your private key, then anyone who has a copy of your public key can use it to decrypt the message. This assures the person on the receiving end that the message came from you and not someone else, since only you have your private key. A message that you have encrypted in this way bears your digital signature.