Cryptography and Cryptosystems in Blockchain

By Udit Agarwal


Cryptography studies techniques for secure communication in the presence of third parties, known as adversaries. Cryptography encrypts information so that it can only be read by someone with the appropriate key to decrypt it. In the context of blockchain, cryptography plays a crucial role in ensuring the security and integrity of transactions.

A cryptosystem is a set of cryptographic algorithms to encrypt and decrypt messages. Cryptosystems have three main components: plaintext, ciphertext, and a key. The plaintext is the original message that needs to be encrypted, the ciphertext is the encrypted message, and the key is a secret value used to encrypt and decrypt the message.

In blockchain, cryptography is used in various ways to ensure the security and privacy of transactions. One of the most common cryptographic techniques used in blockchain is hashing. Hashing is a process that takes an input message of arbitrary length and produces a fixed-length output called a hash. The hash function used in the blockchain is a one-way function, which means it is easy to compute the hash of an input message, but it is nearly impossible to reverse the process and add the original letter from its hash.

What is Hashing?

Hashing is used in blockchain to create a digital signature of a transaction. When a user creates a new transaction, the transaction is hashed, and the resulting hash is digitally signed with the user’s private key. The resulting digital signature is then added to the marketing and broadcast to the network for validation.

Another cryptographic technique used in blockchain is public-key cryptography. Public-key cryptography is a method of encrypting and decrypting messages using a pair of keys: a public key and a private key. The public key is made available to anyone who wants to message the private key owner, while the owner keeps the confidential key secret.

In blockchain, public-key cryptography is used to create digital wallets, which are used to store and manage cryptocurrencies. Each wallet has a public key and a private key. When a user wants to send a cryptocurrency to another user, they create a new transaction and encrypt it using the public key of the recipient’s wallet. The transaction can only be decrypted by the recipient using their private key.

Finally, blockchain also uses cryptographic protocols such as consensus algorithms to ensure the integrity and security of the blockchain network. Consensus algorithms are used to achieve agreement among nodes in the web on the current state of the blockchain. These algorithms rely on cryptographic techniques to ensure that transactions are validated and added to the blockchain securely and transparently.


Advantages of Cryptography

Cryptography, the art of writing or solving codes, has been used for centuries to secure sensitive information. Cryptography plays a critical role in modern digital communication and has several advantages.


One of the most significant advantages of cryptography is confidentiality. Encryption can make messages and data unreadable to anyone who needs the necessary key to decrypt them. This ensures that sensitive information remains private and cannot be intercepted by unauthorized parties.


Cryptography also ensures data integrity by providing a way to detect any unauthorised changes to the data. Using cryptographic hash functions, data integrity can be verified by comparing the original data’s hash value with the received data’s hash value. Any changes to the data will result in a different hash value, allowing the receiver to detect tampering.


Cryptography provides a way to authenticate the identity of individuals or systems in communication. Using digital signatures, a sender can prove their identity and ensure the recipient knows the message came from them. This helps to prevent impersonation attacks and ensure that communication is secure.


Cryptography also provides non-repudiation, meaning a sender cannot deny having sent a message. By using digital signatures, a sender cannot later claim that they did not send a message or that the message was altered in transit. This helps to ensure accountability and prevent fraud.


Cryptography is a versatile technology that can be applied in various scenarios. It is used in secure communication protocols, such as SSL/TLS, VPNs, and SSH, to provide secure communication over networks. It is also used in secure storage, such as encrypting files and folders on a computer. Additionally, cryptography is used in digital currencies, such as Bitcoin, to ensure secure transactions.


Cryptography is often required by law, regulation, or industry standards to protect sensitive information. For example, the Payment Card Industry Data Security Standard (PCI DSS) requires using cryptography to protect payment card data. Failure to comply with these requirements can result in fines, legal action, and damage to reputation.

Bottom Line

In conclusion, cryptography plays a critical role in the security and privacy of blockchain transactions. Techniques such as hashing and public-key cryptography create digital signatures and encrypt transactions. In contrast, consensus algorithms use cryptographic protocols to ensure the integrity of the blockchain network. As blockchain technology continues to evolve, using cryptography is likely to become even more critical for ensuring the security and privacy of transactions.

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