Nelly S.
Nelly S.
Jan 11, 2022

Types of Cryptography in Blockchain

tl;drHow does an automated cryptocurrency system like Bitcoin’s or Ethereum’s ensures all transactions are processed with due diligence and authenticity without intervention? Cryptography is the key to decentralisation, security, peer-to-peer architecture, and many other winning features. Enter the underlying concept and tools of cryptography, which form the backbone of cryptocurrency processing.
Types of Cryptography in Blockchain
Types of Cryptography in Blockchain
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What is cryptography?

Cryptography is a method of protecting communications and information through codes so only those for whom the info is meant can read and process it. In a few words, cryptography is the science of hiding information. More specifically, modern cryptography makes use of mathematical theories and computation to encrypt and decrypt data or to guarantee the integrity and authenticity of the data.

The "Crypto" in Cryptography

The word "crypto" literally means secret,  mystery writing, concealed, or the ability to exchange messages that the intended recipient can only read. Relying upon the configuration, cryptography technology can ensure pseudo- or complete anonymity. Cryptography guarantees the protection of the transactions and, therefore, the participants, independence of operations from a central authority, and protection from double-spending.

Cryptography in Use

Cryptography technology is employed for multiple purposes, including:

  1. securing the various transactions occurring on the network;
  2. controlling the generation of the latest currency units; and
  3.  verifying the transfer of digital assets and tokens. 

The History of Cryptography

The origin of cryptography probably dates back to about 2000 B.C., with the Egyptian practice of hieroglyphics. These hieroglyphics consisted of complex pictograms, the whole meaning of which was only known to an elite few.

Early Usages of Cypher

The first known use of a contemporary cypher was by Julius Caesar (100 B.C. to 44 B.C.). He failed to trust his messengers when communicating with his governors and officers. For this reason, he created a system in which each character in the messages was replaced by a character three positions before it in the Roman alphabet.

Cryptography Recent Applications

Cryptography has become a battleground for a number of the world's best mathematicians and computer scientists in recent times. Securely storing and transferring sensitive information has proven critical to success in war and business.

However, the web has allowed the spread of powerful programs and, more importantly, the underlying cryptography techniques. Today, many of the foremost advanced cryptosystems and concepts are public.

What Does Cryptography Include?

Cryptography is closely associated with the disciplines of cryptanalysis and cryptology. It includes microdots, merging words with images, and other ways to cover information in storage or transit. However, in today's computer-centric world, cryptography is most frequently related to scrambling plaintext (ordinary text, sometimes referred to as cleartext) into ciphertext (a process called encryption), then back again (known as decryption). Individuals who practice this field are called cryptographers.

Modern Cryptography

Modern cryptography concerns itself with the following four objectives:

  1. Confidentiality: The data cannot be understood by anyone for whom it wasn’t intended.
  2. Integrity: The information cannot be altered in storage or transit between the sender and intended receiver without the alteration being detected.
  3. Non-repudiation: The creator/ sender of the data cannot deny their intentions of creating or transmitting the data at a later stage.
  4. Authentication: The sender and receiver can confirm each other's identity and, therefore, the origin/ destination of the data.

Cryptographic Algorithms

Cryptosystems use a group of procedures called cryptographic algorithms, or cyphers, to encrypt and decrypt messages to secure communications among devices, applications, and computer systems. A cypher suite uses one algorithm for encryption, another for message authentication, and another for key exchange. This process, which is embedded in protocols and written in software running on operating systems (OSes) and networked computer systems, involves:

  • private and public key generation for data decryption/ encryption,
  • digital signing and verification for message authentication, and
  • key exchange.

Cryptography Methods Employed in Cryptocurrencies

There are multiple methods for encryption in cryptography, including symmetric-key cryptography, asymmetric-key cryptography, and hash functions, which we will delve into in the following sections.

Symmetric-Key Cryptography in Cryptocurrencies

In this encryption method, which is also known as “Secret-Key” Cryptography, we take one key into the application. This standard secret key is used for both the encryption and the decryption process. Using a single standard key enables securely transferring the key between the sender and the receiver. A straightforward example is representing alphabets with numbers - say, "A" is 01, "B" is 02, and so on. A message like "HELLO" is encrypted as "0805121215," and this value is going to be transmitted over the network to the recipient(s). Once received, the message will be decrypted using the identical reverse methodology - "08" is H, "05" is E, and so on, to induce the first message value "HELLO".

Whether or not unauthorised parties receive the encrypted message "0805121215," it'll be of no value unless they know the encryption methodology. The above is just an example of symmetric encryption; there are many complex variations for enhanced security. This method offers the benefits of easy implementation with minimum operational overhead but suffers from some problems regarding the protection of shared keys and scalability.

Asymmetric-Key Cryptography in Cryptocurrencies

The second procedure is Asymmetric Encryption Cryptography, which uses two different keys, public and private, to encrypt and decrypt data. The general public key is disseminated openly, just like the address of the fund receiver, while the personal secret is known only to the owner. An individual can encrypt a message using the receiver's public key during this method, but it may be decrypted only by its private key.

This method helps achieve the authentication and encryption functions for cryptocurrency transactions. The previous is achieved because the public key verifies the paired private key for the actual sender of the message. At the same time, the latter is accomplished as only the paired private key holder can successfully decrypt the encrypted message.

Bitcoin Asymmetry: secp256k1

The asymmetry used for Bitcoin keys is named elliptical curve cryptography. The precise method is secp256k1 and was chosen by Satoshi for no particular reason apart from it had been available at the time! 

Hash Functions Cryptography in Cryptocurrencies

Hash functions do not make use of keys; they rather use a cypher to get a fixed-length hash value from the plaintext. It is nearly impossible for the contents of plain text to be recovered from the ciphertext. Hashing is employed to efficiently verify the integrity of information of transactions on the network. It maintains the structure of blockchain data, encodes people's account addresses, is a necessary part of encrypting transactions that happen between accounts, and makes block mining possible. Also, digital signatures complement these various cryptography methods by permitting actual participants to verify their identities to the network.

Multiple variations of the above methods with selected levels of customisation will be implemented across various cryptocurrency networks. Examples of such functions are SHA-256 and SHA3-256, which transform arbitrary input to 256-bit output.

Cryptography Concerns

Attackers can bypass cryptography, hack into computers for encryption and decryption, and exploit weak implementations, like default keys. However, using encryption algorithms, cryptography makes it harder to hacker for attackers to data protect and access messages. Increasing concerns about the processing power of quantum computing led NIST (National Institute of Standards and Technology) to create new standards for public-key cryptography.

Possible Changes of Cryptography in the Future

At now, cryptocurrency cryptography is functioning exceptionally well for the foremost part, so it's unlikely that significant changes to the underlying public-key cryptography structure will occur any time soon. It seems that more and more people will start becoming comfortable using cryptocurrencies that depend upon this technology.

However, because technology tends to boost over time, someone may invent a system that's even better than public-key cryptography. If this happens, cryptocurrencies may even be safer.

Cryptography and Bitcoin

The general public key cryptography of the main cryptocurrencies like Litecoin, Bitcoin, Ethereum is at the centre of their strength and continues to do so. With such technologies and advancements, it's not unlikely that Bitcoin or perhaps several other cryptocurrencies could start to compete with the dollar and other fiat currencies in the next decade. Keep checking to stay updated about the hottest news of the crypto world.

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