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Crypto Security

Posted in Bitcoin, Blockchain, Crypto, and Mining

Cryptographic Security

Cryptographic security is a common concern for many when being introduced to the ever growing world of blockchain technology. Hacking is on the rise and rumors are spreading of countries engaging in secret cyberwars. The precarious matter of data hacking and identity theft has never been so problematic.

How will Bitcoin keep your information safe if every transaction in Bitcoin history us viewable by anyone at anytime?

The answer is encryption—the process of converting information or data into a code. The resulting code is known as Cryptography—which serves as a means of storing and conveying information in a secure, yet traceable manner.


History of Cryptography

In 1998 David Chaum published a paper from the University of California called “Blind Signatures For Untraceable Payments”. The paper proposes a new kind of cryptography allowing individuals the ability to provide proof of payment without disclosing time, amount, or identity of the payee. Cryptography was reborn and adopted for use by cryptographic election systems

In 1998 Wei Dai published a description of “b-money”, an anonymous, distributed electronic cash system use. Then came Nick Szabo’s idea of “bit gold”, an electronic currency system which requires users to complete a proof of work function using cryptography to be put together and published. Even though more digital money systems were attempted all failed to solve the growing problem of double-spending with

The solution came from an unknown creator who went by the name of Satoshi Nakamoto in 2009 when he published the famous “White Paper” of Bitcoin labeled as “A Decentralised Electronic Cash System?”. The report defined a system using peer to peer cryptography without the need for a mediating third party by using the Proof Of Work system — Which forms a record that cannot be changed without having to enter it back into the validating system of bitcoin miners.

Bitcoin Cryptography

A private key is a randomly generated 256-bit string of numbers and letters that is a secret known only to the owner of the Bitcoin. The owner of the private key has full access to the funds and can send and receive Bitcoin. Private keys must never be shared with anyone, otherwise, you risk the funds being accessed by an unauthorized party.

Public keys are calculated from the private key and can be shared in order to receive Bitcoin. A public key can be used to determine if a signature is valid and belongs to the private key.

A digital signature is created mathematically using both the hash (see below) and public key. The signature verifies the transaction in the public ledger. It only allows the owner of a private Bitcoin address to transfer funds to another valid address.


The main purpose of this component of blockchain technology is to create a secure digital identity reference. Identity is determined by the creation of both private and public cryptographic keys. The combination of these keys is used to authenticate consent providing an extremely useful digital signature.

In the physical world, it is common to use handwritten signatures on handwritten or typed messages. They are used to bind authenticity to the writing. Similarly, a digital signature is a technique that binds a person/entity to the digital data by encrypting it into hash keys.

Input Puzzle – Output Hash

The Bitcoin Blockchain uses Cryptography to create encrypted identifiers – It shrinks the original transaction by using a mathematical algorithm or “puzzle”, generating an output that is often called the message digest or simply the “hash”.

The hash serves the dual purpose of identification as well as integrity verification. An identification string also produces its own identity is called a self-certifying identifier.

Cryptographic Wallet

A Bitcoin wallet is a self-certifying identifier and used also as a secret piece for its private data, which is used to sign transactions, identify ownership, The referenced hash can then be backtracked through the blockchain to validate or proves the balance its Bitcoin wallet.  The key cannot be changed without having to pass network verification again, Thus eliminating any possibility of double-spending taking place. The process of revalidating will generate a brand new cryptographic hash which is added to the chain.

Bitcoin uses the SHA-256 algorithm to encrypt hash keys which are sized at 32 bytes. The hash encrypts messages from sender to receiver to prevent tampering while transmitting, making it highly improbable that another message sequence would produce the same exact hash output.

Qualities of the Bitcoin Blockchain –

1) Confidentiality

(the information cannot be understood by anyone for whom it was unintended)

2) Integrity

(the information cannot be altered in storage or transit between sender and intended receiver without the alteration being detected)

3) Non-repudiation

(the creator/sender of the information cannot deny at a later stage his or her intentions in the creation or transmission of the information)

4) Authentication

(the sender and receiver can confirm each other?s identity and the origin/destination of the information


Final Thought

Today many people use cryptography for coding and decoding information between parties so that only those for whom it is intended can read and process it. This brilliantly created crypto provides the ultimate protection when processing transactions. You can place your trust in this new and exciting digital currency. After gaining insight into Bitcoin’s structure, it’s easy to see how it provides security that is second to none.

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