Right from the surge of blockchain technology. A lot has been made out to the open and a lot has been concealed too.
Blockchain technology is simple to say, but in the other hand, hard to comprehend.
The best way to understand it is to look at the functions and its product.
Cryptocurrencies are one of the core products of blockchain technology and since 2010, the world has been hit differently by cryptocurrencies. Thus creating a new vision of a digital world.
Cryptocurrency work with the core features of cryptography. So what is cryptography and how does it relate with cryptocurrency and blockchain technology?
All these will be discussed in this article, stay glued.
To make things easy, we have to group the discussion into 4 parts.
- Cryptography technology
- Blockchain and cryptography
- Cryptocurrency and cryptography
- How is cryptography used in cryptocurrency
Cryptography technology
Cryptography is the process and method used to make sure third parties or intermediaries have no information or data in the communication business of two different parties. Cryptography uses technology to conceal data from third parties in a communication business involving two different people.
From the two Greek words of Cryptography, Kryptos and Graphein. Cryptography means hidden writings, as kryptos and Graphein means hidden and writings, respectively.
This concept of Cryptography makes it the most important parent of the parent of cryptocurrency (blockchain).
Blockchain and Cryptography
Cryptocurrencies are built on blockchains, which is a secured ledger that verifies, secures and record crypto transactions.
Think of a blockchain as a crypto ledger for better understanding.
The blockchain is a secured peer to peer (P2P) network where a transaction can be done by 2 parties without intermediary.
This blockchain is made up of blocks(group of data) and chain (links of the blocks), which are together linked by the cryptography concept.
Cryptocurrency and cryptography
Having discussed blockchain and cryptography. Since blockchain is the bed rock of cryptocurrency it will be easy to understand cryptocurrency and cryptography.
Cryptocurrencies are digital currencies which transactions are recorded and secured through cryptography and not through central authorities or intermediaries (banks).
Simply put, cryptocurrency are built on blockchains which uses the concept or protocols of cryptography. This makes it easy to say that, blockchains are built for cryptocurrencies through cryptography.
How is Cryptography used in Cryptocurrency
We have already laid out why cryptography is the basis of cryptocurrency, but just to digress a little bit, we are going to be pragmatic in laying out the effect of cryptography on cryptocurrency through their blockchains.
The Blockchain utilizes two cryptographic protocols, which are the asymmetric key algorithms and the hash protocols.
How is the asymmetric key function used in blockchain
Asymmetric key function makes use of keys in its process.
The keys are called the private key and the public keys. The public key is the encryption key, while the private key is the decryption key.
Encryption: Process that involves the conversion of normal text into cypher text.
Decryption: Process that involves the reverse of the encryption process( conversion of cypher text into normal or plain text)
Key: A key is an output induction tool in a cryptographic function.
The assymmetric key function gives rise to the public address and private addresses of a soft wallet.
The private key which is a description key is used to confirm or verify the owner of the locked key with permission to view the content of the private key, why the public key is used to enable private consensus from the public to the user.
How is the hash function used in blockchain
The hash function is not made up of keys, unlike the asymmetric key function.
The hash function takes some of the plain text value with the help of a Cypher(coverts plaintext to cypher text).
The hash function makes it possible for everyone to have a good view of transaction going on in a particular blockchain. Hash functions can make users verify the successfulness or failure of their crypto transactions.
The hash function brings the following effects in blockchain;
- Any change in hash value will give rise to different results
- Any input has it’s own output
- All blocks can be linked together through the hash function
- The hash function reveals the uniqueness and authenticity of the blockchain
- Impossible to hack or reverse
Cryptography has made a positive effect in the financial systems of the world through blockchain.
Financial uses of blockchain technology
- Money disbursements: With blockchain, cryptocurrency were created to enable money transfer securely and easily recorded. Any cryptocurrency transfered can be verify through a secured ledger called the blockchain. Blockchain technology made it easy for transaction to be tracked easily by the public and not by a central body. The increase in the adoption of blockchain is easily traced to it’s transparency potentials.
- Money Lending: The troubles and misfortunes gotten from central financial systems (banks) can be curbed through blockchain. Smart contracts makes it possible through the blockchain. Smart contracts can let two persons execute transactions securely. A smart contract executes transactions when some criteria are met. In this process, the issue of collateral, margin call, repayment, and loan retake can be made possible, freely, and without stress.
- Insurance: There is transparency in blockchain technology, and this has made people to find peace and refuge using the technology. Smart contracts can be used to execute transparent and secured insurance businesses, between customers and insurance companies. With this, any insurance claim made cannot be tampered with or duplicated.
- Real estate: The stress in the documentation of landed properties, verification of purchased lands, and allocation of purchased lands, through manual paper work, can be mitigated with blockchain technology. With the use smart contracts, verification and transfer of landed properties can be made seamlessly, and also verified securely by the customers and real estate companies. Missing or duplication of properties cannot occur in a blockchain equipped real estate firm.
Conclusion
Blockchain technology has taking over the world and tech enthusiasts are working earnestly to acquaint themselves with the right blockchain technology knowledge.
Since the world is embracing digital technology, it is not a bad idea if you brace yourself up with the nitty-gritties of blockchain technology.