Bitcoin has been making headlines owing to the gradual yet steep rise in its valuation over a decade. It has paved the way for other cryptocurrencies, which cumulatively have established a market worth more than a trillion dollars today.
However, many investors fear cryptocurrency as an investment option because of the high volatility of the market and lack of official acceptance from mainstream centralized investment bodies.
Many people fail to understand that cryptocurrencies are way more secure than physical currencies because of the usage of encryption and cryptography in their founding blockchain technology. Decentralization primarily focuses on not transferring control over any singular body. Therefore, the founders of the tokens ensure a high level of security for transactions and a streamlined flow of the coins in circulation without external interference.
Working of cryptography
Cryptography refers to the act of encrypting messages and data so that only the intended recipients can understand the information. On the recipient end, the receiver decrypts the encrypted data to obtain the actual message. This entire process of encryption and decryption takes place by using a type of key and complex algorithms.
Cryptography works depending on the working of encryption keys. These keys are responsible for encoding the message so that no unauthorized third party can intercept the messages apart from the two ends, sender and recipient. For further details, consult the official trading system!
Cryptography methods and their types
Cryptography in the blockchain is a vast topic. It includes three main methods which differ from each other in their process of functioning:
- Hash functions: this specific type of encryption is independent of the use of keys. A Hash value is generated from the plaintext using a cipher.
- Symmetric key cryptography: also known as secret-key cryptography, this method uses a single common key for both encryption and decryption.
- Asymmetric key cryptography: built on the constants of symmetric-key cryptography, this method uses a pair of keys, 14 encrypting and the other for decrypting. Encrypting key is also known as the public key, and the decrypting one, the private key. This is the most widely used cryptography method.
Does Bitcoin use cryptography?
Yes. Bitcoin uses cryptography to protect the users from double spending and to ensure the pseudonymity of transactions. Cryptography is different from encryption of data. A significant number of people mistakenly understand that Bitcoin uses encryption instead of cryptography.
Bitcoin does not use encryption. Bitcoin is known to use the Elliptic Curve Digital Signature Algorithm (ECDSA) along with the elliptic curve secp256k1 instead of encryption.
Since Bitcoin is a digital currency, we can store it digitally in crypto wallets. Passwords protect cryptocurrency wallets.
Unlike the majority of digital passwords, this password cannot be changed or recovered. If the user forgets the password, the chances are that nobody can ever retrace the account. Since no Central body controls the circulation of Bitcoins, one can approach no authority regarding the renewal of the password. We can quote a real-life practical incident where a crypto exchange lost around 200 million Dollars of client money after the id holder’s death before revealing the password.
The Bitcoin peer-to-peer network provides all of its users with a private key and public key. The public key is analogous to your account number, which you can share with everyone for transactions to your ID. On the other hand, you can compare the private key to a debit card pin, which helps access your digital wallet funds. You should not share the private key with anyone for security purposes.
The cryptocurrency market has witnessed dramatic swings in prices, and this is a dynamic phenomenon. Regardless of the volatility, one can conclude that cryptocurrency definitely has some edges over the prevalent physical form of money and its controlling infrastructure.
Cryptocurrency investment requires intense research and knowledge regarding the working of the entire system. We suggest every reader to invest some time in this research before investing their hard-earned money.