A Refresher on the Benefits of Blockchain Technology, Cryptocurrency, and Cryptography

Those interested in cryptocurrency and blockchain technology readily recognize the benefits of this relatively new technology as well as how it can shape the future. Compared to fiat currency, the decentralized nature of cryptocurrency means a government’s bank cannot take it away to recoup its own losses. Cryptocurrencies are also digital without the ability for counterfeiting or reversing transactions, which protects businesses as well as the average person from fraud, such as charge-backs or counterfeit bills.

There is also no risk of someone pulling money from your crypto account without you sending it, such as there would be if someone got ahold of your credit card. Cryptocurrency also delivers immediate settlement of funds, so you do not have to wait days and it provides lower fees. From a global perspective, anyone with internet can utilize cryptocurrency, helping those without access to a traditional bank or exchange.

Applications for the Blockchain

The blockchain technology behind cryptocurrency has its own long list of benefits and use cases, fueling the spread of blockchain. Businesses can benefit from:

• Cost-effectiveness and traceability in their supply chain management.
• Quality assurance by identifying the source of irregularities.
• A lack of human error in recording transactions.
• Smart contracts that are significantly easier to use than traditional contractual transactions.

The blockchain also has potential applications in voting as a way to prevent electoral fraud. In addition, it can be used to provide openness and reliability for stock exchanges. For example, Australia plans to switch its stock exchange to a system powered by the blockchain. Assuming it is successful, others may follow. Everyone can benefit from blockchain-enabled energy grids, which track usage accurately and allow for sustainable solutions. Similarly, anyone can appreciate the ability to make peer-to-peer transactions with cryptocurrencies across borders without dealing with exchange rates and other hassles. Overall, the trustworthiness and transparency of blockchain technology’s immutable ledger provide most of these benefits.

The Use of Cryptography in Cryptocurrency

The “crypto” portion of “cryptocurrency” comes from its use of cryptography, but the average person who uses cryptocurrency or blockchain technology does not fully understand the role of cryptography in cryptocurrency. Even those with extensive experience with the blockchain may not fully understand the connection. In both the words “cryptocurrency” and “cryptography,” the use of the word “crypto” indicates secret or concealed.

Essentially, cryptocurrencies use cryptography technology for either full anonymity or pseudo-anonymity. Theoretically, the use of cryptography should ensure transactional security as well as the security of participants, provide protection against double spending, and guarantee that there is no central authority.

In reality, cryptography has multiple applications within cryptocurrency, including controlling how new currency units are generated, securing transactions on the network, and verifying the transfer of the tokens and digital assets. The cryptography methods in use by the blockchain, as well as other technologies, rely on advanced mathematical codes as a way to transmit and store data values in a way that is secure. In this way, only those who should receive the transaction or data will be able to read, receive, and process it. This acts much like a signature would in the real world, ensuring transaction and participant authenticity.

To go into more depth, several specific cryptography methods are used within cryptocurrencies. These include symmetric and asymmetric encryption cryptography, hashing, and digital signatures.

Hashing efficiently verifies transactional integrity on the network. Hashing will keep the structure for a given piece of blockchain data while encoding account addresses. This makes it possible to mine blocks and is key for encryption transactions between accounts. Digital signatures give genuine participants a way to provide proof of identity to the network.

Symmetric encryption cryptography uses a single secret key for encrypting raw messages at their source. It then sends this encrypted message and decrypts it once it reaches the destination using the same secret key. While it is simple to implement and has minimal operational overhead, there are scalability issues, and the shared key presents a security concern.

Asymmetric encryption cryptography has a public and a private key for encrypting and decrypting. Only the owner will know the private key, while anyone can know the public key. This lets someone encrypt messages with the public key while requiring the private key for decryption, adding security.