1.4 Cryptography

Cryptography in Blockchain

Cryptography is fundamental to blockchain technology, providing security, integrity, and privacy in a trustless environment. It ensures that transactions are secure and tamper-proof while enabling participants to maintain anonymity.

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Key Cryptographic Concepts

1. Hashing

   • A hash function transforms input data into a fixed-size output (hash).

   • Properties:

     • Deterministic: The same input always produces the same hash.

     • Irreversible: Impossible to derive the original input from the hash.

     • Collision-Resistant: Two different inputs should not produce the same hash.

   • Use Cases:

     • Linking blocks in the blockchain (e.g., SHA-256 in Bitcoin).

     • Verifying data integrity.

2. Public-Key Cryptography (Asymmetric Cryptography)

   • Mechanism: Involves two keys:

     • Public Key: Shared with others to receive messages.

     • Private Key: Kept secret and used to sign or decrypt messages.

   • Use Cases:

     • Digital signatures to verify transaction authenticity.

     • Generating wallet addresses.

3. Digital Signatures

   • Mechanism:

     • A private key signs the transaction, creating a unique digital signature.

     • The public key verifies the signature’s validity.

   • Use Cases:

     • Ensures the sender is authorized to spend funds.

     • Prevents tampering with transaction data.

4. Elliptic Curve Cryptography (ECC)

   • A lightweight cryptographic technique used in blockchain to generate public and private keys.

   • Advantages:

     • High security with smaller key sizes compared to RSA.

     • Efficient for resource-constrained devices.

5. Merkle Trees

   • A hierarchical data structure that summarizes all transactions in a block.

   • Properties:

     • Efficient verification of large datasets.

     • Any tampering in the transaction data invalidates the root hash.

   • Use Cases:

     • Block validation.

     • Ensuring data integrity.

6. Zero-Knowledge Proofs (ZKPs)

   • A cryptographic method where one party proves to another that they know a value without revealing the value itself.

   • Use Cases:

     • Enhancing privacy in blockchain (e.g., ZCash).

     • Secure authentication.