We all know about cryptocurrencies and the attention around has increased due to Facebook’s involvement with it. Due to such attention, many people are looking forward to being potential investors in the future and enter the crypto world. We all are aware of the cryptocurrencies being untraceable and shrouded in anonymity, for whatever reasons that attract us to this attribute of cryptocurrency.
While many crypto pundits and aficionados are aware of the basic security of cryptocurrency, a large chunk of the market have no clue how crypto works. So, here are the basic principles of cryptocurrency explained. There are three main components of crypto security which are Asymmetric Cryptography, Hashing, and Digital Signatures. They are explained as follows –
Asymmetric Cryptography –
A Basic Lock and Key Mechanism
Asymmetric cryptography is always concerned with two keys, a public key, and a private key and they both act as a lock and key for each other. If a Message containing information is encrypted with a private key, it can only be decrypted by a public key and vice versa. This acts as the backbone of many cryptographic schemes such as SSL and TLS including many cryptocurrencies that follow this simple mechanism. A piece of information that can be put out there in the world using a public key and that piece must be guarded using the private key.
Hashing – A Unique Code For Everything
Hashing, in simple words, is encrypting a message or piece of information into a code called hash. The hash of the message is calculated using the information that the message contains. The hash is always determined using an algorithm. The input of the algorithm is directly dependant on the data of the arbitrary length. The output of the calculated hash is always predetermined and remains the same for the same algorithm elsewhere. This means that the same input will give out the same data every time.
While it is easy to convert a message to a hash, but it is difficult to know the content of the original message using the hash. This is because for a small change the hash entirely. For example, the change of a word in a message or even capitalization of a letter can lead to the generation of a new hash.
Digital Signatures – The Enforcement Tool
Digital Signature is a combination of both Hashing and Asymmetric Cryptography. The sole purpose of Digital Signature is to enforce nonrepudiation and confirm the integrity of a message. The integrity lets you state that the piece of information that you create is the same as the information sent. Non-repudiation lets you state that the message you create can only be created by you and no one else.
In simple words, Digital Signatures act like the protection of intellectual property (trademarks, copyrights) for cryptocurrencies and blockchains. While these are an effective way to claim protection, they aren’t going to encrypt anything on its own. A digital signature doesn’t keep messages secret, for that hashing is used.