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Advances in computer technology have made the data more accessible and, although this can be a huge advantage, they also have a downside. Online data is subject to a variety of threats, including theft and corruption. Cryptography (or encryption) is a solution that has helped protect information from certain risks associated with storing and distributing data.
This does not mean that the concept of data encryption is new. Even before the digital age, people masked messages to prevent them from being read by an unintended audience. But the increasing use of computing devices has brought the science of cryptography to a whole new level.
What is Cryptography?
In a nutshell, cryptography is the science of hiding information. In particular, modern cryptography uses mathematical theories and calculations to encrypt and decode data or to ensure the integrity and authenticity of the information.
In the encryption process of the basic text, the plaintext (data that can be clearly understood) is subjected to an encryption process that turns it into an encrypted text (which is not readable). In this way, it is possible to guarantee that the information sent can only be read by a person with a specific decryption key.
Using special encryption methods, sensitive data can be sent even over unprotected networks. The encryption level will depend on the degree of data protection. For example, the type of security used in normal personal files (for example, contacts) differs from the type used in cryptocurrency networks.
Learning how cryptography works are fundamental to understanding its importance in cryptocurrency systems. Most blockchain systems, such as the Bitcoin system, use a specific set of cryptographic methods that allow them to function as a public, decentralized register, through which digital transactions can be executed in a very secure manner.
How does cryptography work?
Modern cryptography includes various research areas, but some of the most important are those related to symmetric cryptography, asymmetric cryptography, hash functions, and digital signatures.
The Bitcoin protocol uses cryptographic tests to protect the network and guarantee the reliability of every transaction. Digital signatures ensure that every user can only spend funds from their portfolio and that these funds cannot be spent more than once.
For example, if Alice sends 2 Bitcoins to Bob, she creates a transaction that, essentially, is a message that confirms the addition of 2 Bitcoins to Bob’s wallet, while simultaneously removing coins from Alice’s wallet. However, it can only do so by providing a digital signature.
Another important element of the Bitcoin protocol is the Hashcash function, which defines a coherent Proof of Work algorithm and a mining process (responsible for network security, control of transactions and creation of new coins). Hashcash uses a cryptographic function called SHA-256.
Cryptography is an integral part of blockchain technology and, therefore, is crucial for any cryptocurrency. The cryptographic evidence applied to distributed networks allowed the creation of solid economic systems, giving rise to bitcoins and other decentralized digital currencies.