What is Cryptography and how does it work?

Cryptography is the science of secure communication. This article will provide an overview of cryptography and the history of secure communication.



9/27/20222 min read


What is Cryptography?


Cryptography is the study and practice of protecting communication by using algorithms to generate ciphertext that cannot be understood by unintended recipients. Transactions involving digital currency can be made pseudonymous, secure, and "trustless" thanks to cryptography, and they don't require the involvement of any banks or other intermediaries.

The word "cryptocurrency" comes from the Greek word "crypto," which means "secret." This tells you what cryptography is all about. Cryptography is the discipline of communicating in a way that cannot be understood by anyone other than the intended recipients. The sender "encrypts" the message, making its contents unintelligible to anyone but the intended recipient; the recipient then "decrypts" the message, restoring its readability.

Cryptocurrencies use cryptography to facilitate anonymous, secure, and "trustless" transactions, meaning you don't have to know anything about a person to safely transact with them. A bank, credit-card company, government, or other third party is not required. Every Google search you conduct, every email you send, is encrypted and decrypted by our computers and the networks they're linked to.

Why is cryptography so important?

It is entirely a cryptographic concept that underpins cryptocurrencies. Bitcoin was invented by a person (or group of people) known by the pseudonym Satoshi Nakamoto and outlined in a paper posted to a cryptography message board in 2009.

The double-spend problem was the thorniest issue that Nakamoto solved. Since Bitcoin is based on cryptography, there is nothing to prevent someone from creating and spending multiple copies of the same Bitcoin. In Nakamoto's solution, public-private key encryption, a well-known encryption arrangement, was used.

The technology used by Bitcoin (and Ethereum) and many other cryptocurrencies is called public-private key encryption. It enables a "trustless" transaction between strangers and makes security possible without a trusted intermediary like Paypal or a bank.

How does public-private key encryption work?
  • The Bitcoin network generates a public key for each user from a private key. To send someone Bitcoin, you need their public key. You can give people your public key without restriction. However, the private key is essential in order to access those funds.

  • In addition to being revolutionary, Bitcoin is a peer-to-peer network that uses cryptographic methods to verify transactions' authenticity.

  • By processing a string of data through an algorithm, your public key is generated from your private key. Since this process is virtually impossible to reverse, no one can guess your private key from your public key.

  • Since your public and private keys are linked, the network knows you own your bitcoin - and it will remain yours as long as you keep your private key.

  • Another interesting aspect of Bitcoin is the fact that transactions are irreversible. Of course, this is the case since there is no credit card company that can be called if you make a mistake. The double spend problem is when someone tries to spend the same money twice. Permanent transactions are a key part of the solution to this problem because they can't be changed.

  • The Bitcoin blockchain is the other half of the solution; it is a distributed ledger (like a bank's ledger books) that records every Bitcoin transaction and is constantly updated through the combined efforts of all the computers in the Bitcoin network.