Cryptography and Mechanics Behind Blockchain

The use of blockchain hinges on cryptography. Numeric cryptography can be regarded as a recent invention, with the ciphers of the past relying on exchanging words for words and letters for letters. As we'll see, modern cryptography is a very powerful tool for securing communications, and, importantly for our topic, determining the provenance of digital signatures and the authenticity of digital assets.

In this chapter, the following topics will be covered:

• Principles of security
• Historical perspective – classical cryptography
• Cryptographic signatures
• Hashing

Principles of security

Cryptography safeguards the three principles of information security, which can be remembered by the mnemonic device Central Intelligence Agency (CIA):

• Confidentiality: Ensures that information is shared with the appropriate parties and that sensitive information (for example, medical information, some financial data) is shared exclusively with the consent of appropriate parties.

• Integrity: Ensures that only authorized parties can change data and (depending on the application) that the changes made do not threaten the accuracy or authenticity of the data. This principle is arguably the most relevant to blockchains in general, and especially the public blockchains.

• Availability: Ensures authorized users (for example, holders of tokens) have the use of data or resources when they need or want them. The distributed and decentralized nature of blockchain...

Historical perspective – classical cryptography

Cryptography is the term for any method or technique used to secure information or communication, and specifically for the study of methods and protocols for secure communication. In the past, cryptography was used in reference to encryption, a term that refers to techniques used to encode information.

At its most basic, encryption might take the form of a substitution cipher, in which the letters or words in a message are substituted for others, based on a code shared in advance between the parties. The classic example is that of the Caesar Cipher, in which individual letters are indexed to their place in the alphabet and shifted forward a given number of characters. For example, the letter A might become the letter N, with a key of 13.

This specific form of the Caesar Cipher is known as ROT13, and it’s likely the...

Types of cryptography

Cryptography is principally divided into symmetric and asymmetric encryption. Symmetric encryption refers to encryption in which the key is either pre-shared or negotiated. AES, DES, and Blowfish are examples of algorithms used in symmetric encryption.

Symmetric cryptography

Most savvy computer users are familiar with WEP, WPA, or WPA2, which are security protocols employed in Wi-Fi connections. These protocols exist to prevent the interception and manipulation of data transmitted over wireless connections (or, phrased differently, to provide confidentiality and integrity to wireless users). Routers now often come with the wireless password printed on them, and this is a very literal example of a pre...

Summary

The world of blockchain and cryptocurrency exists thanks largely to the innovations of the last century in cryptography. We've covered how cryptography works conceptually and how cryptographic operations, specifically hashing, form a large part of what happens behind the scenes in a blockchain.

In the next chapter, we'll build on this foundation and introduce Bitcoin, the first (and most notable) blockchain application.