Cryptocurrencies and digital assets have become a big part of our daily lives, whether we invest in them, learn about them, or simply talk about them with our peers. But where exactly does “crypto” come from, the keyword behind “cryptocurrency”? “Crypto” means “secret” in Greek, and it comes from the cryptography technology that stands at the base of cryptocurrencies.
Cryptography as a science is nothing new. On the contrary, it has existed long before our digital era. It has been used in different ways but with the same purpose: to secure information by using a secret code that only intended recipients can understand. Egyptians used hieroglyphs to convey secret messages in their tombs. Spartans used a “scytale” to encrypt their messages, and only recipients that used the same device could decipher the texts. Julius Caesar is famous for using cryptography, having created his own cipher text system, “Caesar’s cipher,” by shifting the position of letters in the alphabet. Modern cryptography uses mathematical theories and computation for data encryption or decryption. Let’s see how all of this translates into the crypto world.
What is cryptography?
Cryptography is the science of sending secure, encrypted information between two or more parties. Different cryptographic methods are used to encrypt and decrypt messages, allowing digital currency transactions to be anonymous, secure, and “trustless”, without the involvement of any central authority or third party.
Cryptography is essential in all aspects of the digital era, not only when it comes to digital money. Almost every action you do on your laptop connected to the Internet involves encryption and decryption of data.
Cryptocurrencies rely entirely on cryptographic techniques and ideas. Bitcoin, the first and most famous cryptocurrency in the world, appeared in 2009 when the anonymous founder or founders under the pseudonym Satoshi Nakamoto published its whitepaper on a cryptography message board. Nakamoto proposed the solution for the double-spend problem based on the public-private key encryption technology.
How does cryptography work?
There are several cryptography methods used in cryptocurrency networks:
Symmetric encryption - This method uses an identical encryption key to encode the message at the source and send the message to its recipient, where it gets decoded using the same key. Without knowing the secret key, it’s impossible to decrypt data successfully, so the encrypted message can’t fall into the wrong hands.
Asymmetric encryption - The asymmetric method is used widely in crypto. It uses two types of keys, the public key, and the private key. The public key can be shared with anyone, such as the wallet address where to send or receive coins, while the private keys give access to the funds, and only the owner should have access to them. Each crypto wallet has a public key and a corresponding private key.
Hashing - Hashing is a vital part of a digital signature system. It’s used to verify the data of cryptocurrency transactions. A hash function transforms data of any size into fixed-sized output. This output generated by hash functions is called a hash value. Digital signatures allow the network participants to prove their identity within the network.
In our final thoughts on how cryptography works, we want to mention that although this science has existed for thousands of years, cryptocurrencies use it only for a short period. As crypto technology advances, the need for encrypted messages and secure transactions will grow exponentially, making cryptography an integral and valuable part of any peer-to-peer network.
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