we'll learn What is Encryption and How Does it Work?
You’ve heard the term encryption, and probably know your cryptocurrencies are encrypted. But what does encryption mean exactly? We discuss the various types of modern encryption methods and how encryption is a key component of blockchain protocols.
Encryption refers to technical processes of converting plaintext into ciphertext and back again that secure data and systems, making it difficult for unauthorized parties to gain access to encrypted information. This process generally falls into two categories: symmetric or asymmetric encryption. Symmetric key systems use the same key for encrypting and decrypting data and asymmetric systems use public and private key pairs for encrypting and decrypting data.
Encryption refers to technical processes that secure data and systems, making it difficult for hackers to gain unauthorized access to information or to meddle with networks and transactions. In modern cryptography, encryption generally entails the conversion of readable plaintext into ciphertext (encrypted data that is unreadable) with the use of an encryption algorithm or cipher. Only those who are authorized to access the data are able to decode the ciphertext back into readable plaintext.
What is encryption?
Encryption is basically the process of converting clear information into code in order to prevent unauthorized parties to access it. Governments, businesses, and individuals use encryption techniques to safeguard their personal data and prevent fraud. Recent studies suggest that roughly 50% of the internet data and communication is already encrypted through the HTTPS protocol.
How does data encryption work?
Encryption involves the conversion of plain data into unreadable data. In a basic process of text encryption, a plaintext (data that can be clearly understood) undergoes an encryption process that turns it into ciphertext (which is unreadable). By doing this, one can guarantee that the information sent can only be read by a person in possession of a specific decryption key. When this key is used to decrypt the data, the information converted back into its original state.
Contrary to popular belief, most cryptocurrencies and their blockchain networks do not rely on encryption techniques. Instead, they rely on hash functions and digital signatures. For instance, the Bitcoin Protocol makes use of cryptographic proofs in order to secure the network and ensure the validity of each transaction. Digital signatures guarantee that each user is only able to spend the funds of his own wallet and that these funds cannot be spent more than once.
However, cryptocurrency websites might use encryption to keep the details of their customers safe. Cryptocurrency wallets also use encryption to protect wallet files and passwords.
What are the benefits of encryption?
Encryption is useful for protecting sensitive information like names, addresses, phone numbers, private messages, and social security numbers. If hackers infiltrate a computer network and access a system, they will be unable to decipher this data without a decryption key.
Encryption also provides businesses and individuals with privacy. They can exchange coded information over the internet and prevent surveillance from government agencies. Many of the world's biggest companies are currently using this technology to keep customer information safe. In the event of a data breach, hackers will be unable to access a customer’s sensitive data, such as credit card number or personal address.
Organizations might also use encryption to improve their compliance procedures. Healthcare companies in the United States, for example, need to encrypt patient data in order to adhere to HIPAA data quality standards. The federal government can fine companies who fail to protect patient data properly.
Encryption prevents hackers from accessing data, improves compliance, reduces fraud, and makes it safer to send money online when using cryptocurrencies. More organizations and individuals are using this technique to shield their sensitive data.
Plaintext and Ciphertext
Plaintext refers to any information, such as text on websites, programs, or music files, that can be easily read or deciphered by humans or machines. Sensitive information such as account passwords, which might be visible — and ripe for stealing — in plaintext if processed over the internet needs an added layer of security to remain confidential. This is where encryption comes in.
Encryption converts plaintext into ciphertext, or encrypted data that is unreadable, with the use of an encryption algorithm or cipher. Only authorized users can access the data and are able to decode the ciphertext back into readable plaintext.
Encryption Algorithms and Keys
This process of encryption and decryption, from plaintext to ciphertext and back to plaintext, generally involves the use of encryption algorithms and keys. Encryption algorithms are mathematical formulae that can scramble plaintext (the input) into cipher text (the output). The key, generated by the algorithm, works to transform the resulting ciphertext back to its original readable form (and vice versa). The security of any system relies on a strong encryption algorithm that can’t be easily hacked, as well as keeping the key hidden from potential intruders. A key is a string of data or bits – or more simply, a string of numbers or letters – that is inputted into the encryption algorithm. Keys are generally randomly generated, and unlike a password, are not intended to be memorized by a user to input.
Modern cryptographic systems generally use symmetric and asymmetric encryption. In symmetric key systems, the same key is used for encrypting and decrypting data. In asymmetric or public key systems, the encryption key is publicly available, but only the authorized holder of the private decryption key can gain access to the decoded plaintext.
The Importance of Cryptography for Blockchain
Blockchain uses cryptography to protect identities of the users of a network, to ensure secure transactions, and to protect all sorts of valuable information. Thanks to cryptography, everyone who uses blockchain can be sure that the information recorded in a blockchain is valid and secure.
Although based on a similar framework, public-key cryptography is a better option for the blockchain technology than symmetric-key cryptography. Public-key cryptography has a number of improvements compared to symmetric-key cryptography. It allows users to transfer data using a public key that can be accessed by anyone.
A combination of public and private keys enables encryption of the information, while the sender’s and recipient’s public keys decrypt it. It’s impossible to get the private key having only the public one so everyone can send their public keys without being afraid of somebody accessing their private keys. When the sender encrypts the information, they can also be sure that it will be decrypted only by the intended recipient.
In addition, blockchain relies on digital signatures. Just like regular signatures, digital signatures are intended for authentication and validation. Digital signatures are an integral part of various blockchain protocols, being one of the main tools used to ensure the integrity and security of the information stored in a blockchain. The range of applications includes securing blocks of transactions, software distribution, transfers of important information, contract management, and other tasks where preventing external access is important.
Theoretically, when a user sends some encrypted data, it can be altered by a hacker, which will be unnoticed by both the sender and the recipient. However, digital signatures prevent hackers from altering the data because if they change it, the digital signature will also change and become invalid. Thus, digital signatures not only protect data but also indicate if it has been altered.
Additionally, digital signatures secure the identity of the sender. Every user has his or her own digital signature so that all users can be sure that they’re communicating with the right person. It’s virtually impossible for a hacker to fake somebody else’s digital signature because such a task is almost impossible from the mathematical point of view. Digital signatures are linked to private keys, ensuring non-repudiation. Thus, if a user signs something digitally, it becomes associated with this user and can be legally binding. It becomes possible due to the reliability of private keys and digital signatures.
Asymmetric Encryption and Cryptocurrencies
Cryptocurrencies stay secure by relying on modern asymmetric encryption methods and the secure nature of transactions on a blockchain. Cryptocurrency holders use private keys to verify that they are owners of their cryptocurrency. Transactions are secured with hashing and blockchain encryption techniques.