Blockchain and Cryptography Salaries and Rates in 2024

Blockchain and Cryptography

Cryptography in Blockchain

As a conclusion, another fundamental question we always ask is, How is blockchain secure? What makes blockchain secure? Blockchain security is based on two main concepts: Cryptography and Hashing. In this article, I’m going to discuss these two important concepts in detail.

Cryptography in Blockchain

Cryptography refers to the procedure of encrypting the data with the intention of protecting it from unauthorized access. In blockchain, cryptography is used to protect transactions occurring from one node to another in the network. Cryptography, along with hashing, secures messages and information in the blockchain network.

Cryptography is primarily used to secure participants, transactions, and anti-double-spending mechanisms, ensuring that only intended recipients can access, view, and process transaction data.

Role of Cryptography in Blockchain

The efficiency of computing technology has advanced significantly, leading to the development of various forms of cryptography within blockchain technology. The improvement of cryptography technology contributes to enhancing blockchain limitations.

Cryptography in blockchain is crucial for protecting user privacy, transaction contents, and data consistency. It involves core technologies such as symmetric encryption and asymmetric encryption.

• Symmetric-key Encryption: Uses the same key for encryption and decryption. It is suitable for bulk encryption and requires less computational power.
• Asymmetric-key Encryption: Utilizes different keys for encryption and decryption. It is used for sharing secret keys and plays a significant role in website server authenticity.

Wallets and Digital Signatures

A blockchain wallet is special software or hardware where a user’s transaction information and personal data are stored. Wallets store private keys and maintain transaction balances.

Digital signatures are proofs provided by users to verify their identity in the blockchain network. They ensure the authenticity and integrity of transactions.

Cryptography Hash Function in Blockchain

The biggest application of cryptography is cryptographic hashing. Cryptographic hashing is utilized for immutability in the blockchain. It involves no encryption keys. When verifying the hash algorithm, the hash is added to the block. The log of the single hashing aggregate hash is called a root hash, helping to hook the block and covalence inside block, ensuring any change to the block data breaks down the blockchain. Commonly used hash functions include MD5 and SHA-1.

Properties of Cryptographic Hash:

• For a particular message, the hash function remains constant.
• Each minor change to the data results in a major change in the hash value.
• The input value cannot be guessed from the output hash function.
• They are fast and efficient, relying largely on bitwise operations.

Benefits of Hash function in Blockchain:

• Reduces the bandwidth of transactions.
• Prevents modification of data blocks.
• Makes transaction verification easier.

Use of Cryptographic Hash Functions

Since blockchain is public, securing any data stored on it and user data from malicious intentions is essential. Cryptography plays a key role in achieving this security.

Once the hash algorithm verifies a transaction, it is added to the blockchain. As it gets further confirmed, it’s added to the network, completing a chain of blocks.

Cryptography utilizes mathematical codes, allowing authorized users to read and process data, while preventing unauthorized access.

There are various tools related to cryptography and blockchain that perform different functions.

Benefits of Cryptography in Blockchain

There are numerous advantages of cryptography in blockchain. Some of them are explained below:

• Encryption: Secures information and communication using asymmetric encryption.
• Immutability: Ensures the integrity of data in the blockchain by cryptographically linking blocks and preventing tampering.
• Security: Makes transaction records easier to manage using encryption and keys, enhancing overall security.
• Scalability: Guarantees the authenticity of transactions and allows an infinite number of transactions to be recorded.
• Non-repudiation: Provides non-repudiation services through digital signatures.
• Collision Resistance: Ensures unique hash functions for input values, distinguishing messages.
• Protection Against Hackers: Prevents data changes by ensuring signatures become invalid if tampered with.

Limitations of Cryptography in Blockchain

Below are some limitations of cryptography in the blockchain:

• End-to-end encryption and digital signature mechanisms may restrict access to critical information, even during crucial decision-making moments.
• Cryptography is just one layer of information security and cannot defend against denial-of-service attacks or total system breakdowns.
• Cryptography does not protect against vulnerabilities posed by poorly designed protocols, procedures, or systems.
• Cryptographic techniques require significant capital investment and may lead to processing delays.
• Advancements in solving mathematical problems can render cryptographic techniques vulnerable.

Cryptography in Blockchain

As a conclusion, another fundamental question we always ask is, How is blockchain secure? What makes blockchain secure? Blockchain security is based on two main concepts: Cryptography and Hashing. In this article, I’m going to discuss these two important concepts in detail.

Limitations of Cryptography in Blockchain

Below are some of the limitations of cryptography in the blockchain:

• Information not available: End-to-end encryption and digital signature mechanisms might make critical information inaccessible to the legitimate user even at the most critical moment of decision-making. A network can be closed to traffic and made inaccessible by an attacker.
• High availability: Cryptography is just one of many layers of information security and cannot defend against denial-of-service attacks or total system breakdowns. Different measures are needed to defend against such attacks.
• No protection against vulnerabilities: Cryptography does not defend against vulnerabilities and threats posed by poorly designed protocols, procedures, and systems. These issues must be addressed through proper design of the defense infrastructure.
• High cost: Cryptography requires significant capital investment and time. Public key cryptography necessitates establishing and maintaining the entire public key infrastructure, which demands substantial capital investment. Additionally, certain cryptographic techniques can delay the transmission process, slowing down information processing.
• Vulnerability: Cryptographic techniques rely on the presumed difficulty of mathematical problems. Advances in solving these problems can render cryptographic techniques vulnerable.

The Need for Layer 1 Blockchains

A blockchain is a peer-to-peer, distributed network of nodes that record crypto transactions, subject to some rules and built-in consensus mechanisms that verify the authenticity and accuracy of the transactions, which are further aggregated and coded into sequential blocks of data that constitute an immutable chain of data blocks.

Currently, Blockchain is a well-known term and a widely used method by enthusiasts and investors from all parts of the world. Due to the processing power required to catch up with the increasing number of transactions, some of the protocols for cryptocurrencies blockchain limit the number of transactions to be processed which unfortunately makes the network slow necessitating scaling activities such as layer 1 blockchain solutions.

What is Layer 1 Blockchain?

A blockchain has multiple layers, and layer 1 forms its core. This layer is responsible for transaction validation, the creation of a block, consensus mechanism (which is a process of validating transactions; for instance, proof of work (PoW) and proof of stake (PoS) are consensus mechanisms), and more. Bitcoin, Ethereum, Cardano, and many more blockchain platforms are layer one Blockchain. We have covered layer one Blockchain as well in this blog.

Top 10 Layer 1 Blockchains in 2024 – The List is Out!

This blog underscores the layer 1 blockchain list that in the next few years will be widely discussed for the power of recreating the decentralised future like nothing else ever would.

Cryptographic Techniques

• Encryption
• Hash Functions
• Elliptic Curves
• Digital Signatures
• Hash Pointers and Merkle Trees

Consensus Mechanisms

Proof of Work (PoW)

The original consensus mechanism was called PoW (for Proof-of-Work) and involved participants (or ‘miners’) trying to solve highly complex mathematical problems in order to confirm transactions and append blocks to the blockchain. This made the network extremely energy-intensive in order to safeguard it from attacks. The amount of energy consumed has become such a problem that Lego has started making mining rigs out of their children’s toys.

Proof of Stake (PoS)

PoS replaces the energy-sucking PoW with an algorithm in which a random group of validators are chosen to create a new block according to the cryptocurrency they hold and are willing to ‘stake’ on the outcome. PoS is far more efficient and environmentally friendly than Bitcoin, while maintaining a reasonable level of security against bad actors.

Delegated Proof of Stake (DPoS)

DPoS not only improves the efficiency through slot-allocation, but also increases democratic security. This is because it allows token-holders to vote for a number of delegates through the native voting system to participate in validating transactions and form blocks.

Practical Byzantine Fault Tolerance (PBFT)

PBFT (short for Practical Byzantine Fault Tolerance) is a consensus mechanism that is fast and efficient. It uses a pre-defined set of nodes to achieve consensus in what is known as a permissioned blockchain; ie, one with a select group of nodes whose identities are known and agreed upon beforehand. A certain number of faulty nodes can be tolerated, without affecting the security and soundness of the blockchain.