Cryptocurrencies, such as Bitcoin and Ethereum, have started gaining huge popularity because they are decentralized, secure, and almost anonymous in nature. This design helps to support peer-to-peer operations, which make it possible to send funds without a central authority.
This brings about one big question, how does this automated and pseudonymous system of cryptos ensure transactions are done accurately with no intervention?
Understanding the Crypto in Cryptography
The term “crypto” means secret or concealed. Therefore, “cryptography” is secret writing, which means that only the targeted recipient is able to decrypt and read the message. Indeed, cryptography is employed in a number of areas and used for securing transactions in a network, verifying the transfer of crypto assets, and controlling new currency units.
Cryptocurrencies borrow a lot from the world of traditional signatures by adopting techniques used in cryptography and encryption keys. They employ mathematical codes to help store and transmit data in a format that only the intended persons are able to receive, read and process data. This ensures that the transaction remains authentic.
How Exactly Does Cryptography Work?
Cryptography, in the simplest language, is a method of sending secure messages between two or more participants. The sender encrypts the message, and the recipient decrypts it. The most important item in cryptography is the encryption keys, which make the message unreadable unless one has them.
Many crypto coins, such as Bitcoin, might not be 100% secret, but there are others like Monero and Zcash that guarantee total privacy.
Some of the main tools that were designed as part of cryptography are now being employed in the designing and application of cryptography. These are functions of hashing and digital signatures that are part of Bitcoin processing. However, the Bitcoin blockchain does not employ hidden messages.
Cryptography Methods Employed in Cryptocurrencies
There are a number of cryptography methods used in the development of cryptocurrencies. Here are the most common:
Symmetric Encryption Cryptography
This method uses the secret key to encrypt the raw message at the source and then decrypt it at the targeted destination. It is one of the simplest methods, but there are many variations used in the crypto world. It is preferred for its simplicity.
Asymmetrical Encryption Cryptography
This method is more advanced and uses two different keys, the public keys and private keys, to encrypt and decrypt data, respectively. The private key is only known to the owner, but the public key can be given to any person intending to send you crypto coins. Asymmetrical encryption is the most preferred method in crypto coins.
In Bitcoin, the asymmetry employed is secp256k1, also referred to as the elliptical curve cryptography.
This cryptographic method is employed to help verify data integrity on a blockchain network. It helps to encode people’s addresses and maintain blockchain structure. It is used to make mining in blockchains possible.
Concealment and anonymity are critical aspects of cryptocurrencies, and different methods are used to ensure that individuals, their assets, and activities remain hidden to their expectations.