Cryptography 101: How the Ancient Art of Cryptography Changed the Financial Industry
Cryptography 101: How the Ancient Art of Cryptography Changed the Financial Industry
Cryptography is a method of storing and transmitting data in an obscure and confidential form so that only the intended receivers of the message are able to understand it.
Advantages of Cryptography
a) Allows information to be kept private
b) Adds a layer of authenticity
c) Provides tactical advantage in war times
d) Ensures the integrity of the transmitted information
e) It's @$!&^ fun
Two main types of cryptography
a) Symmetric
Symmetric cryptography means that the same code is used to encrypt and decrypt the message. The most common type of symmetric cryptography is Caesar's code. It essentially moves a letter to a different one by following a corresponding number.
Example:
This type of encryption has a fundamental flaw. It is that in order for the receiver to be able to decrypt the message, the encryption has to be sent as well. In other words, the key is publicly available. If this falls into the wrong hands, then anyone would be able to read the message.
b) Asymmetric
This is a much more secure type of encryption and it is also the type used in cryptocurrencies. It adds an integral part to the process, and that is the private key.
In asymmetric cryptography, the message is ENCRYPTED using the PUBLIC KEY but DECRYPTED using the PRIVATE KEY. This allows for a more secure transmittal of information. It is, however, far slower than symmetric cryptography.
Cryptocurrencies have taken this to a much higher degree by adding an encrypted signature. This signature validates that the message received was from the right sender.
This feature allowed cryptocurrencies to be transferred to anyone from anywhere around the world. This has significantly transformed the financial industry by cutting down international transfer costs and time. It also allows secure and anonymous transfer of financial information globally.
BONUS: Prime Number Encryption
Prime number encryption is one of the most popular encryption methods. The reason is that since the only factors of a prime number are 1 and itself, it is mind-bendingly difficult to be able to mathematical solve what the private key is. It is far too complicated to explain with an illustration so I made a simple example in google sheets. You can view the solution via the link below:
