Cryptography and Its Place in Cryptocurrency

August 29, 2021

You are learning Bitcoin’s history and getting to know everything connected to the crypto rush. You are likely to run across such a definition as cryptography. Cryptography is used all over the Internet and in various spheres of enterprise. This is a science about mathematical methods of securing the confidentiality, integrity and authenticity of information. It developed from the practical use of conveying important information. In this article, we will have a closer look at cryptography and how it is applied in cryptocurrencies.

History of cryptography

To understand the basics of how cryptography works, we can go back to history to the era of Ancient Rome. Julius Caesar was the first to use cryptography. What’s more, he created so-called Caesar cipher to send secret messages in his private correspondence. It is one of the simplest and most widely known encryption techniques. It also has a name of “substitution cipher” as each letter in the plaintext is replaced by a letter some fixed number of positions down the alphabet.

During World War II, the Germans used the Enigma encryption machine to transmit essential information. Alan Turing, who was a talented mathematician, a cryptoanalyst, and a computer scientist, found a way to hack it. They consider that hacking Enigma is one of the major turning points in World War II.

Cryptography at the digital era

Cryptography has become much more complicated with the rapid development of the digital technology. Computers have shared with humanity a dramatic increase in processing power. There is no doubt that a human brain is still the most complex information system. However, when we are taking into account performance of computations, computers are much faster and can process much more information.

Today we associate cryptography with electrical engineering, computer science, and mathematics. Messages are usually encrypted and decrypted using sophisticated algorithms with the help of combinations of these technologies. Cryptocurrencies do not send secret messages though, but cryptography has a key role in the process of crypto formation.

The main principles of using cryptography in blockchain

Cryptography has different levels in blockchain, but the key functions are hashing and digital signing.

  • Hashing. A cryptographic method converts a given key into another value is called hashing. Large amounts of data are converted into short values ​​in the way that are difficult to fake.   This method is mainly used for the following processes: verification and confirmation of balances in your wallets, wallet addresses coding, coding transactions between wallets and mining blocks. A hash function is used to generate the new value according to a mathematical algorithm.
  • Digital signing. This is a kind of digital identification for your wallet. In the crypto world digital signing represents mathematical functions that are correspondent to a certain wallet. Digital signatures use cryptography to identify a wallet and they are secretly linked to public and private keys of the wallet. Your public key is the equivalent of your bank account; the private key is your PIN. The main disadvantage of this system is the need for key protection. If someone knows your private key, he will be able to access your wallet and make any transactions with it.

Bitcoin has no life without cryptography

Cryptography allows creating a system in which parties do not need to trust each other. They can rely on the cryptographic methods. The cryptographic security of Bitcoin’s blockchain has over 10 years of existence. Since then it has experienced multiple attacks and trials to fake the data. And you see the results. Moreover, new cryptocurrencies use more safe methods of cryptography. Had they not invented cryptography, we would have no Bitcoin now.


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