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Bitcoin course for beginners 2 - 02/11

What is cryptography?



The word cryptography comes from the ancient Greek language ‘crypto’ and ‘graphy’, roughly translating to “gibberish writing”.

In order to make messages secret, you use complex mathematics formulas that converts your orders (if you are a general fighting a war) into ciphertext that your enemy can't understand. This process is called “encrypting”, and the reverse process is called “decrypting”.

Cryptography have been used since ancient times. In the movie the “Imitation game” with Benedict Cumberbatch, cryptography was mechanized in the form of an encryption machine. Cryptography moved from hardware into software in the computer era. IBM and the NSA created Data Encryption Standard (DES) at the end of the 70’s.

Cryptographic techniques used for blockchain, and cryptocurrencies rely on key exchange!

It’s done by complex mathematics (an algorithm) that let two computers agree on a key without ever sending one. In other words, mathematical operations that are very easy to do in one direction, but hard to reverse. In cryptocurrencies, they use Asymmetric encryption, where there are two different keys, most often one that’s public and another that’s private.

Therefore, a digital public key can encrypt something that can only be decrypted with a private key. The reverse is possible too: encrypting something with a private key that can be decrypted with a public key.

One of the most famous asymmetric encryption techniques used in cryptocurrencies is SHA-256 named after his inventor: Shamir. This is the backbone of the bitcoin network. To be efficient, SHA-256 needs to be computationally efficient; that is, it shouldn't take too much computing time.

The process of encryption by SHA-256 is also called Hashing. This is a concept that we will use a lot in coming lessons. SHA stands for Secure Hashing Algorithm.


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