Cryptocurrency – the word may sound like futuristic technology, but because of certain misconceptions and media hoax, it has become an abbreviation for insecure and theft-related terms. Let’s try understanding the real technology behind it.
Cryptocurrency is a mix of two words – ‘crypto’ and ‘currency’. ‘Crypto’ in Latin means hidden and refers to the fact that Cryptography techniques are used. ‘Currency’ denotes the monetary or financial form.
What is Cryptography?
It is a branch of computer science that involves working on encryption, decryption and password protection. Cryptography includes a code-based technology to keep the information in a secret state. Cryptography directly changes the data into a format that can’t be decoded or read by an unauthorised user, till the time you get a key to decrypt the data.
How does it work?
Cryptography holds a relation between sender and receiver through a pair of keys. Different types of keys are:
- Single key cryptography– where only a single key is being used for both encrypting and decrypting the data.
- Public key cryptography– Here two keys, public and private, are being used. One is public that anyone can access another is a private key that only an owner can access. As per the process, the sender encrypts the data using the public key and receiver decrypts the same using his/her own private key.
- Hash functions– it doesn’t involve any key and thus also known as a one-way encryption. The main usage of hash functions is to ensure that a file should remain unchanged.
The significance of hash functions in cryptocurrency
A hash is a function that receives the input information of any length known as ‘strings’ and converts it into an output of a fixed length known as ‘digest’. A hash function is one of the most important parts of blockchain management, the backbone of a cryptocurrency. (Read also: What is Blockchain? to know more about the technology). Fixed length Hash function increases security as no one will able to judge the input value by looking at the length of output and even a small change in input will lead to an entirely different output.
In short, we can accept the truth that cryptocurrencies work on one of the most secured technologies in the world. Today’s trend is to believe on ‘what the mass says’, instead of understanding the logic and reason behind it. Cryptocurrency is another product which has suffered from the same tendency. We all should rethink by visualising the working logic and trust the technology for future betterment.