Cryptocurrency Definitions: Cryptography

Cryptography is a method of storing and transmitting data in a particular form so that only those for whom it is intended can read and process it. The method involves creating generated or written codes that allows information to be kept secret. Cryptography converts data into a format that is unreadable for a user, allowing it to be transmitted without anyone decoding it back in a readable format. This practice is essential process for cryptocurrencies, and without it Bitcoin and other cryptocurrencies would have no value or security.

Cryptography aids in non-repudiation, which means that neither the creator nor the receiver of the information may assert they receive or didn’t create it. The information cannot be read to decrypt it. Its integrity is maintained by the data being stored.

Cryptography permits senders and receivers to authenticate one another through the use of key pairs. Here are some of the main types of key pairs:

  1. Secret Key Cryptography – Also referred to as symmetric encryption. Uses only one key for both encryption and decryption.
  2. Public Key Cryptography: Here two keys are used. This type of encryption is also called asymmetric encryption. One key is the public key and anyone can have access to it. The other key is the private key, and only the owner can access it. The sender encrypts the information using the receiver’s public key. The receiver decrypts the message using his/her private key. For non-repudiation, the sender encrypts plain text using a private key, while the receiver uses the sender’s public key to decrypt it. Thus, the receiver knows who sent it.
  3. Hash Functions: These are different from SKC and PKC. They have no key at all and are also called one-way encryption. Hash functions are mainly used to ensure that a file has remained unchanged.