How cryptography in Blockchain works

As you may have noticed, cryptography is our bread and butter here on, given that it’s the underlying technology of SSL certificates. That’s why it’s fascinating to see how cryptography can be utilized in different contexts, one of the most exciting being blockchain. 

In this article, we’ll be giving a simplified overview of how cryptography in blockchain works, as well as why it’s such an intrinsic part of it. By learning how cryptography operates with blockchain, you should develop a better idea of how blockchain works. 

First, let’s quickly remind ourselves of some key terms.

Cryptography and blockchain definitions

Cryptography is the practice of securing communications so that messages can only be read by those who it is intended for. The most everyday example of this is SSL certificates. When a user connects to a website via a web browser, the website’s SSL certificate uses cryptography to encrypt communications between the two parties, meaning that no third parties can intercept this information. 

Meanwhile, blockchain is a public, digital ledger or database that can be used for recording all manner of transaction and tracking assets. Each of these records are processed in the form of a block. Decentralized in nature, blockchains are typically maintained by a peer-to-peer network of computers that must work together to maintain the network and approve and authenticate each block added to the chain. Every block on the chain is immutable and cannot be changed without someone on the network knowing. For a more in-depth explanation of blockchain and its use cases, check out our recent blog post.

Cryptography is fundamental to how blockchain technology works. It’s how each block is authenticated and verified, and it’s the reason why blocks cannot be tampered with once they are added to the chain. Let’s read more about it. 

The types of cryptography utilized by blockchain 

Before we discuss how cryptography is utilized in blockchain, it will be helpful to look at the types of cryptography most commonly used in blockchain: asymmetric cryptography and hash functions.

Asymmetric cryptography

Central to how modern SSL certificates function, asymmetric cryptography encrypts and decrypts by using two different but mathematically related keys, often referred to as key pairs. These key pairs consist of a public key and a private key. When two parties want to communicate securely over the internet, one party will use a public key to encrypt the message and add their digital signature so that the recipient can verify who sent it. The message can only be decrypted with the related private key. Read more about asymmetric cryptography here.

Hash functions

A hash function is a cryptographic function that converts plaintext of any length into ciphertext (unreadable text) of a fixed length using a cipher (a mathematical algorithm that dictates the steps that must be followed for encryption and decryption). The resulting text is known as a hash value. With hashing, every input has a unique output, and it’s almost impossible to recover the plaintext from the ciphertext alone. Furthermore, if the content of the original text changes for whatever reason, the hash value will change too, alerting any recipients that the original text has been tampered with. 

The role of cryptography in blockchain

Now that we’ve familiarized ourselves with the two main types of cryptography used in blockchain, let’s take a look at what they’re actually used for. 

Hashing functions have arguably the most significant role to play in blockchain. Blockchains typically use the SHA-256 hashing algorithm, a one-way hash function that can’t be undone. This is why hash functions are vital to the integrity of blockchains — they link each block together and ensure that the data contained within each block cannot be changed. If anyone does attempt to alter the input of a particular block, even slightly, the output will change completely. This is known as the avalanche effect, a process that breaks the blockchain, rendering it invalid.

Depending on the blockchain, asymmetric cryptography can serve a few purposes, most notably digital signatures. Every transaction or record added to the blockchain is signed by the sender’s digital signature via asymmetric encryption, ensuring that the sender is easily verifiable and the data cannot be corrupted. For cryptocurrency blockchains, digital signatures are also used for digital wallets and multi-signature contracts. 

Wrap up

Hopefully this simplified overview of how cryptography in blockchain works has left you with a better understanding of both subjects. Cryptography as a system plays a key role in keeping public networks secure, so it’s a natural fit for maintaining the integrity and security of blockchains. It ensures that blockchains remain reliable and immutable, ensuring that the technology continues to grow and evolve in new and exciting ways.

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