With the popularity of Cryptocurrency increasing, ‘crypto’ is widely used in place for Cryptocurrency, but it’s true reference is often forgotten. Crypto, the root word references Cryptography. Cryptography is coined from combining two Greek words, ‘krypto’ meaning hidden and ‘graphene’ meaning writing.¹ Cryptography converts ordinary plain text into unintelligible text and vice-versa.² An effective way to store and send data so that only intended parties can read and process it.³

Brief History of Cryptography

The most popular way as of late was its use in Cryptocurrency, but it has been used since the cradle of civilization; as early as 1900 B.C. as Egyptian Hieroglyphs and used by many other civilizations, especially during wartimes. The Egyptians used the Hieroglyphs in a non-standard fashion to hide the message from those who did not know the meaning.⁴ The Greeks wrote messages on wound tape and wrapped the tape around a stick. The writing would be meaningless to anyone that did not have a stick of the same diameter to decipher the message. Caesar Shift Cipher, the Roman cryptography method, utilized the shifting of letters upon an agreed upon number. Although clever, early encryption was easy to break.⁵

Cryptography had no major advancements until the Middle Ages when Western European governments often used Cryptology to keep in touch with ambassadors. Leon Battista Alberti was known as the ‘Father of Western Cryptology’ due to his polyalphabetic substitution. This method was the use two copper disks that fit together which had the alphabet inscribed on it. After every few words, the disks were rotated to change the encryption logic, limiting the use of frequency analysis to crack the cipher. Gilbert Vernam attempted to created a stronger method using cipher disks but ended up creating the Vernam-Vignere cipher, the one time pad which uses a keyword only once, and proven to be unbreakable.⁶

Methods of Cryptography and its Application in Cryptocurrency

In modern times, cryptography has been mass adopted in everyday life for any situation that requires confidentiality, data integrity, entity and data origin authentication, from ATM to email to file storage and now Cryptocurrency transactions. There are three methods that cryptography is used in Cryptocurrency; Symmetric Encryption, Asymmetric Encryption and Hashing.

In Symmetric Encryption both the sender and recipient uses the same secret key. A simple example of this is, each letter of the alphabet is assigned a number value and sent over the network encrypted, once it is received by the recipient it is decrypted using the same reverse methodology. It is the simplest form but there are many complex variations.

Two different keys are used in Asymmetric Encryption, public and private which always come in pairs. The public key is open while the private key is known only to the owner. This method achieves two important functions of authentication and encryption for cryptocurrency transactions. The public key verifies the paired private key for the genuine sender, while only the paired private key holder can successful decrypt the encrypted message. The owner of the private key is assumed to be the owner of the address. This is the method used in Cryptocurrency trading and transactions. For STK’s state channel, despite the fact that a private and public key pair is generated, the private key is never made available to anyone other than the smart contract. This is what makes state channels so powerful and secure, there is no way to steal its private key because it is never seen. The entirety of the system runs on the code that has been deployed, and cannot be messed around by malicious actors.

The third method is Hashing, where no keys are used. A fixed-length hash value is computed as plain text which makes it impossible for the contents of the plain text to be recovered. Hash functions are also used by many operating systems to encrypt passwords. Hashing is used to verify the integrity of data transactions on the network. This encodes people’s addresses and maintains the structure of the blockchain data which is an essential part of the process of encryption transactions that occur between accounts and makes block mining possible. Digital Signatures also complement these cryptography processes to allow genuine participants to prove their identities. Variations of each method can be customized to be implemented across cryptocurrency networks.⁷

Cryptography has evolved over time, and has proven to be an effective component for applications that require security. Earlier cryptography was quite synonymous with encryption and strategy during wartimes. Now, cryptography is mainly based on mathematical theory and computer science practice, widely used in everyday applications including being the backbone of Cryptocurrency transactions.

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