Cryptocurrency and blockchain technology is known for their decentralized nature and the security they provide. The technology behind blockchain maintains a distributed ledger that allows users to produce a decentralized, user-centric environment that the users govern.
The blockchain has the ability to create a user governed utopia that a central authority will not have the power to control. This technology can be a powerful tool if used carefully, but when single handedly used, blockchain has a lot of shortcomings.
While blockchain is an algorithmically decentralized and safe concept, practically speaking, security is the biggest concern. For example, a DeFi DApp is prone to infinite minting attack if hacked. Likewise, a wallet is prone to multiple attacks if a user interacts with a malicious website or just clicks on a wrong advertisement on the internet. Therefore, security is the biggest concern in this upcoming fintech world. Enters: cryptography.
What is cryptography?
Synonym with anonymous cryptography literally means secret writing. Cryptography is essentially a compilation of codes or encryption that allows encoding data between individuals, especially while interacting with third-party platforms. It is mostly used to conceal sensitive data that malevolent parties can see while it flows throughout the internet. Cryptography makes it possible to hide anything from nuclear codes to sending a text message to a friend.
There are many ways in which a cryptographic algorithm works, from assigning a hash value to the date to simply obfuscating it, whatever the system's needs are. While the roots of cryptography can be traced back to ten BC, cryptography has been present and has been used in almost all the major world events; it has straight-up military use cases to basic use cases like securing a phone call.
Cryptographic technology is a versatile technology with multiple use cases in the crypto space. Some of the most common use cases are:
- Securing and verification of the transactions on a particular network in a transparent manner.
- Making sure that the protocol is free from any kind of malfeasance.
- Securing the minting, i.e., generating new currencies, units, etc.
- Verification of transfer of digital assets, including cryptocurrency, NFTs, etc.
How cryptography works
As we mentioned above, there are many ways to approach when it comes to how we can apply cryptography to a piece of data. Before cryptography became associated with modern technology, one of the simplest forms of cryptography was the Caeser cipher. Caesar cipher was used to send important private messages to peers; in it, the letters are simply shifted equivalent to the number of the key. For example, if the key value is 13, the word 'CRYPTOCURRENCY' will be written as 'PELCGBPHEERAPL.' This demonstration is a very simple example of cryptography that was once used by Julias Caeser himself.
In modern times, however, the complexity of such algorithms has increased multifold with the increasing computation power of digital systems. Encryption is one of the most important features of modern cryptography as it encodes the data (known as plain text) into cipher text which can be decoded by the holder of the private key, which converts the cipher text into the plain text again for the user to read. These encryption keys theoretically make a piece of data or transaction unreadable to the outside world; it makes sure that only the concerned party receives the unaltered message.
