Coins such as bitcoin and litecoin etc, have gained some huge traction over the last year. Why? This is in relation to the security and anonymity. This also has to do with it being decentralized. So how does this all work? When you make a transaction and it is processed how do the tools of cryptography work? What is the so-called backbone of how all of this happens and processed?

Crypto means concealed and in this case anonymous. Cryptography guarantees transaction security and participants. There is no central authority, no mistakes, no double spending. Once it is sent there is no turning back. This technology is used for many purposes such as transfers on the network, new currency units and verification of the transfer of digital assets.

Cryptocurrencies are like real world signatures. They use cryptography techniques and special encryption keys. These methods are from advanced mathematical codes that store and transmit values in a secure format. This ensures the person who the data is for is the only one who can receive it.

How Does Cryptography Work?

Think of radio signals. In the first example think of an FM radio signal. Open and verifiable to the public. Our next example is a navy seals at war. Their communications are secure and unpenetrable. That is cryptography. It is a secure technique to send secure messages between two or more participants. The sender encrypts it and only the intended receiver can decrypt it.

Some crypto currencies out there do not use such high encryption. For example bitcoin transactions are public for the most part. If you look at things like Zcash and monero then you will see this type of encryption.

The tools that were developed for cryptography are used in the function of bitcoin processing. Those functions are things such as hashing and digital signatures.

The different types of Cryptography Methods

The first type of encryption is Symmetric Encryption Cryptography. This method uses the same key to encrypt the message, transmit and decrypt. A message like “Sun” will be encrypted as “090807”. This is transmitted over the network and once received it is decrypted using the same reverse methodology. If an unauthorized party receives the encrypted message “090807” it will be useless unless they know the encryption method.

The second type is Asymmetric Encryption Cryptography. This method utilizes public and private keys to encrypt and decrypt the data. The public key can be sent openly but only the receiver while the private key is only known to the owner. Anyone can encrypt the message using the receiver’s public key but only decrypted by using the receivers private key. This achieves the two important aspects of authentication and encryption.

The third type is Hashing. This is used to verify the data of all the transactions being sent on the network. It maintains the blockchain data, encodes people’s personal addresses, encrypts transactions and allows mining.