Cryptography
Cryptography is the set of mathematical methods that make digital security possible. In crypto, it proves who owns what, authorizes transactions and makes the transaction history tamper-evident.
The building blocks
Three tools do most of the work. Hash functions turn any data into a short, fixed-length fingerprint; the same input always gives the same output, but you cannot work backwards, and a tiny change produces a completely different result. Blockchains use hashes to link blocks and to make tampering obvious.
Public-key cryptography gives each user a key pair: a private key kept secret and a public key that can be shared. Digital signatures combine the two. You sign a transaction with your private key, and anyone can check with your public key that the signature is genuine, without ever seeing the private key.
How Bitcoin uses it
Bitcoin uses the SHA-256 hash function for mining and block links, and elliptic-curve cryptography on a curve called secp256k1 for keys and signatures. Since the Taproot upgrade of November 2021 it also supports Schnorr signatures. Ethereum uses the same elliptic curve but a different hash function, Keccak-256.
Note that crypto usually does not encrypt the ledger. Bitcoin transactions are public; cryptography is used to prove ownership and integrity, not to hide the data.
Newer techniques
Zero-knowledge proofs let someone prove a statement is true without revealing the underlying data, for example that a batch of transactions is valid. They power privacy features and many layer 2 scaling networks. Multi-signature schemes require several keys to approve a transaction.
Where security really fails
The mathematics behind major blockchains has held up well; most losses come from people, not broken algorithms. Phishing, leaked seed phrases, malware and badly written software are the usual causes. A longer-term question is quantum computing: a sufficiently powerful quantum computer could break today's elliptic-curve signatures, and researchers are working on quantum-resistant alternatives, though no such machine exists yet.
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Frequently asked questions
Is cryptocurrency encrypted?
Not in the usual sense. Most blockchains are public; cryptography secures ownership through keys and signatures and protects integrity through hashes.
Can cryptography be broken?
Well-tested algorithms like SHA-256 and secp256k1 have no known practical attacks. Weak implementations and stolen keys are the realistic risks.
Will quantum computers break Bitcoin?
A large enough quantum computer could threaten current signatures, but none exists today. Upgrading to quantum-resistant signatures would require a coordinated protocol change.
Related terms
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