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Role Of Encryption In Blockchain

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By Author: Sanchit
Total Articles: 43
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The use of cryptography is a common place in Blockchain technology. It is used as a means to ensure that transactions are done safely while securing all information. Cryptography is the method of disguising and revealing (otherwise known as encrypting and decrypting) information using numbers and mathematics. This means that the information can only be viewed by the intended recipients and nobody else. The method involves taking unencrypted data and encrypting it using a mathematical algorithm. The use of encryption in Blockchain primarily serves two purposes:

Securing the identity of the sender of transactions.
Ensuring that the past records cannot be tampered with.

The type of cryptography used in blockchain is ‘Public-Key Cryptography’, also known as Asymmetric Cryptography. Public-Key Cryptography uses separate keys for encryption or decryption (a public key and a private key) rather than using a single key. In the process, it uses a combination of a user's public key and private key to encrypt the information, whereas it uses the recipients private key and sender's public key to decrypt it. It is impossible to work out what is the private key based on the public key. Therefore, a user can send their public key to anyone without worrying that people will gain access to their private key.

Blockchain technology majorly uses encryption for more secure and incorruptible data in the following ways:

Digital Signatures

In Blockchain technology, Public-Key cryptography produces a digital signature, securing the integrity of the data that is being shown, by combining a user's private key with the data that they wish to sign, through a mathematical algorithm.
Blockchains use signatures for signing transactions. Signatures are used to prove that a certain user is the owner of the inputs corresponding to a certain hash.

Since the actual data itself is part of the digital signature, editing even the slightest aspect of the data reshapes the whole signature, making it false and obsolete. Using Digital Signatures in blockchain technology is capable of guaranteeing that any data being recorded onto it is true, accurate and untampered with. Digital signatures give immutability to the data recorded on a blockchain.

2. Use of Hashes

Cryptographic hashing is a method for transforming large amounts of data into short numbers that are difficult to imitate. Hashes are mostly used in combination with digital signatures. These functions ensure data integrity. The Bitcoin network uses SHA ( Secure Hash Algorithm), SHA-256. In a nutshell, hashes are a one-way cryptographic functions which take any type of input (string, files, etc.), processes the input and provide a fixed size output string called hash. An important property of hashes is that if a tiny amount of input data is changed the output changes significantly. Hence, transactions performed over crypto exchanges
are considered to be secured.

3. Mining Algorithm - Proof of Work

Mining Bitcoin also involves cryptographic algorithms. The miners perform computational work to solve the puzzle, this is why the process is referred to as Proof of Work (POW), based on the Idea of Adam Back and Hashcash. Solving the mathematical problem requires that a miner collects all recent transactions plus some metadata, verify the transactions and run all the data through a SHA256 algorithm. The miner must come up with a number matching a predefined number using the algorithm.
This is possible but would require an unfeasible amount of computing power, which protects the blockchain from manipulation attempts.

Based on the aforementioned information, it can be concluded that the use of encryption in blockchain technology leads to add on security and authenticity in blocks.

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