Importance of encryption in blockchain technology.

Why encryption is important in blockchain and digital security

Since ancient times, the study and practice of creating codes have helped people to communicate with each other safely and secretly. Cryptography has come a long way since then. 

Today, the world is witnessing cryptography turning the tides on technology, creating a behemoth that is blockchain and cryptocurrency – two developments that would not have been possible without the mathematics of cryptography. 

Just as people are used to having passwords for online accounts, PIN, private keys, and public keys are now at the centre of securing crypto assets. Without them, individuals cannot access decentralised services on blockchain either. These cryptographic keys are mostly generated through encryption, by deploying various mathematical algorithms to transform plain text into an unintelligible form, also known as ciphertext.

There are three main types of encryption processes. First, there is the symmetric-key encryption, which involves using a single key to encrypt and decrypt information. Second, there is the asymmetric-key encryption, which involves a public and private key to respectively encrypt and decrypt information. Finally, there is hashing, which involves a one-way encryption of a piece of information. 

Symmetric-key Encryption

In symmetric-key encryption, a common key is used to encrypt and decrypt information. The key is normally kept secret and used to provide authorised access to data. The Advanced Encryption Standard, or AES, and Data Encryption Standard, or DES, are some examples of symmetric-key algorithms, where a single key is used to encrypt electronic data. 

Asymmetric-key Encryption

Asymmetric-key encryption is also known as public-key encryption. In this process, there are two keys involved: the public key and the private key.

For those familiar with crypto and blockchain, they have to manage these keys properly since they relate to the security of their cryptocurrencies and non-fungible tokens (NFTs). The difference between a public key and a private key is easy to remember. The public key, which is used to encrypt information, can be known to anyone. When someone is sending you cryptocurrencies, this is the address you give away. The private key, on the other hand, has to remain secret for the sake of asset security. The private key, which is used to decrypt information, provides access to your digital coins and tokens. If someone else has the private key, he or she will be able to decrypt your secret information and access your cryptocurrency funds. 

Some examples of asymmetric-key encryption algorithms are the Rivest Shamir Adleman, or RSA, and Elliptical Curve Cryptography, or ECC. 

Hashing Function

Hashing can be referred to as a form of one-way encryption. When a plaintext is hashed, an algorithm randomly generates a unique hash value that represents the original data. This process is irreversible, meaning that others cannot use the hash to figure out what the original piece of data was, hence, keeping it secure. No keys are involved. 

The Secure Hash Algorithms, or SHA, is a group of cryptographic hash functions that are designed to keep data secure. This is commonly used in password storage, creating digital signatures, blockchain, and cryptocurrencies.

Using Encryption in Blockchain and its Impact on Security

Asymmetric-key encryption and hashing are common in blockchain technology. For instance, Bitcoin uses the SHA-256 hash algorithm to create and manage addresses or verify transactions. It is one of the most secure ways of transferring information, or in Bitcoin’s case, conducting transactions. 

During a Bitcoin transaction, details such as addresses, asset amount, and the date and time of the transaction are inputs for a hashing algorithm to generate a random hash value. Hash values that were generated during prior transactions are also inputs for the hashing of the latest Bitcoin transaction. This process ultimately creates a chain of transaction blocks. 

Hashing makes it nearly impossible for bad actors to access transaction blocks and manipulate their details. This is because anyone who tries to do so will need to modify all other blocks to avoid discrepancies.  

UKISS Technology utilises all three encryption processes to protect private keys to crypto-assets as well as secure electronic data. The Hugware® is a pair of user-friendly cryptographic keys that can keep crypto-assets safe. When used with the UKISS Suite of Digital Security Applications, the hardware wallet can protect encrypted files, including photos, videos, and large folders.