A Simple Guide to Understanding Blockchain Cryptography

Sensitive financial information is sent between banks, payment processors, and clients every day. This information must be stored securely in a database using high-level security measures.

Blockchain cryptography is an important concept. Without it, lots of private data would be easily accessible to hackers. In basic terms, cryptography involves two steps: encryption and decryption.

Encryption is the conversion of plaintext (regular text) to ciphertext (random sequence of bits). Decryption is the process of converting ciphertext to plaintext. Encrypting plain text and converting it to ciphertext requires a cypher. A cypher is a mathematical function(or cryptographic algorithm) used to change plaintext to ciphertext. The same method is used but in reverse for decryption.

Types of cryptography

Symmetric-key algorithms- encrypt and decode data using a single cryptographic key. They encrypt data in a way that it is difficult for an attacker to decode the data without the key. 

Asymmetric-key algorithms- use two mathematically linked keys known as public and private keys. One key is for data encryption, and the other is for data decryption. Asymmetric-key algorithms and hash functions are the two types of cryptographic algorithms used in blockchains.  

A cryptographic hash is a sequence of characters. As a hash function, blockchains typically employ the SHA-256 hashing algorithm. Any plaintext data can be converted into a unique string of text using a hashing algorithm. It is impossible to reverse the procedure once the original is encrypted. This is how cryptographic hashing is different from symmetric or asymmetric encryption, both of which can be decrypted given a key. There is no way to identify the actual data from a hash you’ve never seen before.

Another important aspect of hashing is the ability to condense a large amount of data to a small string of text in a hash. Regardless of how long or complex the data is, hashes are always the same length. 

What cryptography brings to the Blockchain

Cryptography provides us with the means to encrypt data, transmit bitcoin securely, and track transactions over time. Thus enabling a safe exchange of bitcoin without the need for a centralised authority. Blocks can then be added to the chain indefinitely.

Cryptographic hash functions provide the following benefits to the Blockchain:

• The avalanche effect – states that a change in the data might result in a drastically different outcome.
  
• Uniqueness – refers to the fact that every input has a unique result.
  
• Deterministic – inputs will always give the same results when sent through the same hash function.
  
• Reverse engineering is impossible – meaning we cannot recreate inputs from outputs or hash functions.

Summary

The Blockchain is complex and ever-growing. It is therefore fair to expect an increased need for security. Cryptography has become a requirement for the Blockchain to protect user transaction information and privacy while ensuring data consistency. It is the system that will keep everyone’s data secure forever.