Cryptography combines two Greek words, ‘crypt,’ which means hidden, and ‘graphy,’ which means writing. Cryptography is a method of protecting information, transactions, and communication through the use of secret codes. Cryptocurrencies rely heavily on cryptography, hence the crypto in cryptocurrencies. It is a technology that uses mathematical and computational principles to encode and decode data. Cryptography is a method employed to keep transactions secret between two parties. Cryptocurrencies are virtual or digital currencies secured by cryptography, making them impossible to counterfeit or double spend.
The usage of cryptography is dated far back as 400 BC. The military used it to pass coded messages unknown to the enemy. Without encrypting this information, who knows, they might get compromised by the enemy.
With the invention of the internet, we have moved transactions online; we also have secretive or confidential information shared between people. To ensure secure conversation and transactions between two parties without any breach, we now have cryptographic techniques infused into web applications, applications, and any medium of interaction.
Cryptography in Blockchain
Blockchain is the technology that enables the existence of cryptocurrencies. The concept behind digital currencies stems from cryptography. The blockchain technology which keeps cryptocurrencies alive depends heavily on this same cryptography. Since the encryption is between two parties, it automatically takes away the central figure. Decentralization, a significant advantage of cryptocurrencies, is only possible because of cryptography.
To better understand cryptography in blockchain, we have to understand the types of cryptography techniques there are. There are mainly three different cryptographic techniques. They are:
- Symmetric-key cryptography: This technique involves both the sender and receiver sharing a single key. The sender encrypts a plain text and sends it to the receiver; the receiver, in the same way, uses this key to decrypt the message and recover the plain text. A third party can’t decrypt it without the key.
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- Public-key cryptography: Two related keys are used (which are the public and private keys). The public key is used for encryption, while the private key is used for decryption. The public key may be freely distributed, but not the private key; it is kept secret.
- Hash Functions: This technique, unlike others, doesn’t make use of keys. It involves computing fixed-length hash values as per the plain text, which makes it impossible for the context of the plain text to be recovered.
Anonymity is an essential aspect of cryptocurrencies. These various methods are used to ensure that the identity of the parties and their transaction remains undisclosed.
Advantages of Cryptography
Authentication: Cryptography ensures verification of transactions executed on the blockchain. It helps prevent any form of forgery.
Confidentiality: Cryptographic techniques safeguard information and transactions from unauthorized parties.
Disadvantages of Cryptography
– If a user mistakenly forgets the secret key to access the data, it cannot be recovered. For a cryptocurrency trader or investor, if the private key to access the stored fund is forgotten, the fund is gone and can’t be recovered.
– It doesn’t protect data against the loopholes from the poor design of the system. If there is an error in computing, security can be breached.
While cryptography is excellent at securing data, information, and transactions, it also has its drawbacks. Poor or inaccurate design of the system can have grave consequences.