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What Encryption Does Bitcoin Use?

How Does Blockchain Use Public Key Cryptography?

How Does Blockchain Use Public Key Cryptography?

How Does Blockchain Use Public Key Cryptography? Asymmetric cryptography or public cryptography is an essential component of cryptocurrencies like Bitcoin and Ethereum. These advanced cryptographic techniques ensure that the source of transactions is legitimate and that hackers can not steal a users funds. Heres an in-depth look at how blockchains accomplish this with public key cryptography: Public Key Cryptography is a cryptographic system that relies on a pair of keys, a private key which is kept secret and a public key which is broadcasted out to the network. This system helps ensure the authenticity and integrity of a message by relying on advanced cryptographic techniques. Heres an example of how public key cryptography is used in practice: Lets say a user Alice wants to send a message to Bob over an unreliable channel of communication like the internet. Alice could use public key cryptography by generating a set of public and private keys. She could then post her public key to Bob. Now, whenever she wants to communicate to Bob, she can add a digital signature to her message by using her private key. This would prove that she is the creator of the message. Bob can verify the same using the message he received and Alices public key. Public Key Cryptography is an essential part of Bitcoins protocol and is used in several places to ensure the integrity of messages created in the protocol. Wallet creation and signing of transactions, which are the core components of any currency rely heavily on public key cryptography. Bitcoins protocol uses whats called the Elliptic Curve Digital Signature Algorithm (ECDSA) to create a new set of private key and corresponding public key. The public key is then used with a hash function to create the public address that Bitcoin users Continue reading >>

The Math Behind Bitcoin - Coindesk

The Math Behind Bitcoin - Coindesk

Eric Rykwalder is a software engineer and one of Chain.com s founders. Here, he gives an overview of the mathematical foundations of the bitcoin protocol. One reason bitcoin can be confusing for beginners is that the technology behind it redefines the concept of ownership. To own something in the traditional sense, be it a house or a sum of money, means either having personal custody of the thing or granting custody to a trusted entity such as a bank. With bitcoin the case is different. Bitcoins themselves are not stored either centrally or locally and so no one entity is their custodian. They exist as records on a distributed ledger called the block chain, copies of which are shared by a volunteer network of connected computers. To own a bitcoin simply means having the ability to transfer control of it to someone else by creating a record of the transfer in the block chain. What grants this ability? Access to an ECDSA private and public key pair. What does that mean and how does that secure bitcoin? ECDSA is short for Elliptic Curve Digital Signature Algorithm. Its a process that uses an elliptic curve and a finite field to sign data in such a way that third parties can verify the authenticity of the signature while the signer retains the exclusive ability to create the signature. With bitcoin, the data that is signed is the transaction that transfers ownership. ECDSA has separate procedures for signing and verification. Each procedure is an algorithm composed of a few arithmetic operations. The signing algorithm makes use of the private key, and the verification process makes use of the public key. We will show an example of this later. But first, a crash course on elliptic curves and finite fields. An elliptic curve is represented algebraically as an equation of the Continue reading >>

How Does Bitcoin Cryptography Work?

How Does Bitcoin Cryptography Work?

Cryptography is the process of communicating securely in an insecure environment i.e. where other people can listen in and control the communication channel. The message you wish to send is converted to a cipher text that appears to be gibberish unless you know the secret to unlocking it. There are two main types of cryptography symmetric and asymmetric. Symmetric is the oldest form but not the most secure as it implies both the sender and the receiver are in control of the cipher or the coding and decoding key. One of the most common & simplest forms of Cipher similar to the one that Caesar used to communicate with his generals is just shifting the message to be sent by a number of letters in the alphabet. In the picture above the message, cryptocompare.com , is shifted by one letter in the alphabet then sent across the insecure channel to the receiver who decrypts it using the same key i.e. moving the letters one space to the start of the alphabet to decipher the text and reveal cryptocompare.com. These can be relatively easy to decode. Symmetric cryptography has a problem - How to tell the other person what the code is? This has been dealt with somewhat by public key cryptography or essentially where the receiver generates a key pair and then sends the public key to the message sender. The sender then encrypts the message using the receivers public key and sends the encrypted message to the receiver. The receiver then takes the encrypted message and his private key and decrypts the message. This is asymmetric cryptography. This method though can still be subject to the man in the middle attack unless there is some form of centralising authority who preside over keys and owners though certification the most common uses of this are in SSL and TSL Secure Socket Layer & Continue reading >>

How Does Bitcoin Work?

How Does Bitcoin Work?

This is a question that often causes confusion. Here's a quick explanation! As a new user, you can get started with Bitcoin without understanding the technical details. Once you have installed a Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address and you can create more whenever you need one. You can disclose your addresses to your friends so that they can pay you or vice versa. In fact, this is pretty similar to how email works, except that Bitcoin addresses should only be used once. The block chain is a shared public ledger on which the entire Bitcoin network relies. All confirmed transactions are included in the block chain. This way, Bitcoin wallets can calculate their spendable balance and new transactions can be verified to be spending bitcoins that are actually owned by the spender. The integrity and the chronological order of the block chain are enforced with cryptography . A transaction is a transfer of value between Bitcoin wallets that gets included in the block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet. The signature also prevents the transaction from being altered by anybody once it has been issued. All transactions are broadcast between users and usually begin to be confirmed by the network in the following 10 minutes, through a process called mining . Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system. To be confirmed, transactions Continue reading >>

Google Encourages Industry To Use Bitcoin's Sha-256 Encryption

Google Encourages Industry To Use Bitcoin's Sha-256 Encryption

Google Encourages Industry to Use Bitcoin's SHA-256 Encryption Google is encouraging businesses and security practitioners to utilize cryptographic hashes like SHA-256, a Secure Hash Algorithm which serves as the basis of the Bitcoin networks proof of work (PoW) algorithm. Google is encouraging businesses and security practitioners to utilize cryptographic hashes like SHA-256, a Secure Hash Algorithm which serves as the basis of the Bitcoin networks proof of work ( PoW) algorithm. Over the past few years, cryptographers have warned businesses against the use of SHA-1, a hash algorithm which was quite popular until 2014. The Google development and technical team discovered the worlds first SHA-1 collision, which effectively breaks the algorithm for good . With the collision, cyber criminals will be able to insert malware into sites or platforms still utilizing SHA-1. Most websites have already moved on from SHA-1 even before cryptographers began to warn the industry about the security issues of the algorithm. In fact, it will be difficult for attackers to find websites or platform that still rely on SHA-1 to protect their properties. For Google, finding a SHA-1 collision was more of a statement to the industry that Google is one of the most dedicated and advanced security practitioners in the industry. Since the development of the collision required a significant amount of resources and talented minds, not many organizations were keen breaking an algorithm system which the industry has already moved on from. The discovery of the collision which took Google nine quintillion (9,223,372,036,854,775,808) SHA1 computations in total, 6,500 years of CPU computation to complete the attack first phase and 110 years of GPU computation to complete the second phase, is essentially Continue reading >>

Bitcoins Encryption Could Be Broken By 2027, Claim Singapore Quantum Experts

Bitcoins Encryption Could Be Broken By 2027, Claim Singapore Quantum Experts

Bitcoins Encryption Could be Broken by 2027, Claim Singapore Quantum Experts Key protocols securing technology undergirding bitcoin are susceptible to attack by the development of a sufficiently large quantum computer, researchers mostly from Singapore claim in a recently-released paper, Quantum attacks on Bitcoin, and how to protect against them (Quantum), made available through the Cornell University Library. Also read: Is Bitcoin at Risk as Google and IBM Aim for 50-Qubit Quantum Computers? Bitcoins Elliptic Curve Signature Could be Broken by 2027 One particular area at risk are cryptocurrencies, the abstract notes. We investigate the risk of Bitcoin, and other cryptocurrencies, to attacks by quantum computers. We find that the proof-of-work used by Bitcoin is relatively resistant to substantial speedup by quantum computers in the next 10 years, the paper declares. This, they claim, is mainly because specialized ASIC miners are extremely fast compared to the estimated clock speed of near-term quantum computers. The good news turns quickly bad, as the elliptic curve signature scheme used by Bitcoin is much more at risk, and could be completely broken by a quantum computer as early as 2027, by the most optimistic estimates, state authors Divesh Aggarwal, Gavin K. Brennen, Troy Lee, Miklos Santha, and Marco Tomamichel (emphasis added). Hash per second of BTC network in blue; one quantum computer in red. The model is described in detail in Appendices B and C. For comparison, the black dotted line shows the hash rate of a single ASIC device today. In twenty-one math-laden, chart-heavy pages , which include detailed notes, Quantum is a bear of a read. Authors begin with a basic background to Bitcoin, roll through a nice summation of the distributed ledger, and then begin Continue reading >>

The Cryptography Of Bitcoin

The Cryptography Of Bitcoin

It is actually surprisingly difficult for a layperson to find out precisely what cryptography Bitcoin uses, without consulting the source of Bitcoin directly. For example, the opcode OP_CHECKSIG , ostensibly checks the signature of something... but there is no indication what kind of signature it checks! (What are opcodes in Bitcoin? Well it turns out that the protocol has a really neat scripting system built in for building transactions. You can read more about it here. ) So in fact, I managed to get some factual details wrong on my post Bitcoin is not decentralized , which I realized when commenter cruzer claimed that a break in the cryptographic hash would only reduce mining difficulty, and not allow fake transactions. So I did my research and cracked open the Bitcoin client source code. The short story is that the thrust of my argument remains the same, but the details of a hypothetical attack against the cryptographic function are a bit more complicateda simple chosen-prefix collision attack will not be sufficient. The long story? Bitcoin makes some interesting choices of the cryptography it chooses, and the rest of this post will explore those choices. Bitcoin makes use of two hashing functions, SHA-256 and RIPEMD-160 , but it also uses Elliptic Curve DSA on the curve secp256k1 to perform signatures. The C++ implementation uses a local copy of the Crypto++ library for mining, and OpenSSL for normal usage. At the end of this post, you should have a better understanding of how Bitcoin employs cryptography to simulate the properties of currency. In many ways, this is the traditional cryptography in Bitcoin. We ask the question, How do we know that Alice was authorized to transfer 100 Bitcoins to Bob, and anyone who has used public-key cryptography knows the answer i Continue reading >>

Bitcoin Explained Like Youre Five: Part 3 Cryptography

Bitcoin Explained Like Youre Five: Part 3 Cryptography

Bitcoin Explained Like Youre Five: Part 3 Cryptography Since my last posts explaining how Bitcoin works were a bit of a success, I figured I would continue the series. So far weve discussed Bitcoin mining, the incentives and the cryptography used in the protocol. However, I glossed over a key element in the Bitcoin ecosystem digital signatures. This was partly because my goal in the previous posts was only to introduce you to mining, but also because digital signatures are important enough that they deserve their own post. If youre reading this, Im going to assume you have limited knowledge of cryptography. So instead of jumping right into digital signatures, Im going to start by providing a broad introduction to cryptography. Hopefully youll learn not just how Bitcoin works, but also how to stay safe on the internet by keeping your private information away from prying eyes. There are two kinds of cryptography in this world: cryptography that will stop your kid sister from reading your files, and cryptography that will stop major governments from reading your files. Bruce Schneier Obviously, were going to concern ourselves with the latter. Cryptography is the science of using mathematics to encrypt and decrypt data so that we can either store it or transmit it to someone so that only the intended recipient can read it. In practice we take plaintext (the unencrypted data) and encrypt it using a cipher, a mathematical algorithm used to securely encrypt and decrypt data, to produce ciphertext (unreadable encrypted data).In conventional cryptography the samekey is used to both encrypt and decrypt the data. This practice is called symmetric-key cryptography. One of the earliest and most well know ciphers was a Caesars cipher, used by Julius Caesar to protect his military co Continue reading >>

Bitcoin: Inside The Encrypted, Peer-to-peer Digital Currency

Bitcoin: Inside The Encrypted, Peer-to-peer Digital Currency

Sign up or login to join the discussions! Bitcoin: inside the encrypted, peer-to-peer digital currency Calling itself the world's "first virtual currency," Bitcoin offers the Bitcoina pseudonymous cryptographic currency designed by an enigmatic, freedom-loving hacker, and currently used by the geek underground to buy and sell everything from servers to cellphone jammers . No, this isn't a cyberpunk artifact from Snow Crash or Neuromancer; it's a real currency currently valued several times higher than the US dollar, the British pound, and the Euro. Bitcoin is a virtual currency, designed to allow people to buy and sell without centralized control by banks or governments, and it allows for pseudonymous transactions which aren't tied to a real identity. In keeping with the hacker ethos, Bitcoin has no need to trust any central authority; every aspect of the currency is confirmed and secured through the use of strong cryptography. Over the last few months, Bitcoin 's value has risen by an order of magnitude as the sagas of Wikileaks and Anonymous (among others) have highlighted the limits of a financial system which relies on centralized intermediaries. With a current estimated market capitalization of about $100 million, Bitcoin has recently graduated from a theoretical techno-anarchic project patronized by libertarians and hackers to a full-fledged currency prompting comment from technologists and economists. At the time of this writing, one Bitcoin (BTC) is worth about US$15. So how does Bitcoin work? Is it really secure? And is it here to stayor just another digital currency fad? Glad you asked. The problem with purely digital currencies is that of double-spending. Economists in the audience will note that digital products like a movie or a text file are non-rivalrous Continue reading >>

The Cryptography Of Bitcoin

The Cryptography Of Bitcoin

By now, nearly everyone has heard of Bitcoin. In simple terms, Bitcoin is digital cash - amonetary system that melds and anonymity of cash with the convenience, freedom, andpower of the internet, allowing you to send and receive funds around the world without relying on acentral authority such as a bank or a government. Bitcoin's power comes from an invention called "blockchain." A blockchain is a distributedledger that uses the combined power of computers participating in it to operate, which is whatallows for the decentralization of authority in the network. From a technical perspective, there are many interesting concepts that make up a blockchain -distributed databases and consensus (or, decentralized governance) are both fascinating.Fundamentally, however, the basic building block for blockchain systems is cryptography. Cryptography is the study of codes - writing codes, solving codes, and manipulating codes. Yes, thisincludes the super secret spy decoder ring you had as a kid , and even pig latin!Cryptographyis an ancient study that has existed for thousands of years, most often in the form of ciphers. Itis generally believed that ciphers were invented as a method for concealing the informationcontained in a message from any person who didn't intentionally receive it. Cryptography and computers have had a competitive relationship since the beginning of digitalcomputing. During World War II, the United Kingdom invested heavily in deciphering Axis communications. With deciphering becoming too difficult to be performed by hand, a race beganto develop a machine that was capable of deciphering codes faster than any human. This eventuallyled to the development of Colossus , the first digital programmable computer. Since then, the war of computers and cryptography has o Continue reading >>

Encryption - How Are Transactions Secured? - Bitcoin Stack Exchange

Encryption - How Are Transactions Secured? - Bitcoin Stack Exchange

I'm a programmer and want to get to know more about encryption and how Bitcoin works, but there is not much on the web describing how all this code works. It would help if there was some visual way to describe the concept of how and what its doing. How can someone send the public key and private key to another computer without giving away the private key? If you didn't send the private key, how would the other computer know the transaction was from you and not someone else pretending to be you? I have read up on key pairs and have managed to generate a key pair in java. Everyone's example of 'using' key pairs is very vague. How do you "use" the key pair to confirm a transaction. I know you have a private key that signs the transaction and the public key some how confirms the transaction but i don't understand the "how" it is "used" if you send a transaction with your secret key wouldn't that no longer be a secret key? How is the public key confirm the transaction was signed correctly? How can you send your secret key out with out some one using it once they get it? If Bob sends a transaction to Tim would Tim not now have Bobs security key? I'm very sorry if this question sounds dumb. I'm just having a hard time understanding how you can send some one a transaction and be able to "sign" that transaction and how its confirmed. a lot of posts people are saying its Elliptic Curve Digital Signature Algorithm (ECDSA) but how is it doing all of this. Continue reading >>

How Bitcoin Works - Bitcoin Wiki

How Bitcoin Works - Bitcoin Wiki

This article requires cleanup to meet the Bitcoin Wiki's quality standards. This page explains the basic framework of Bitcoin's functionality. There are several cryptographic technologies that make up the essence of Bitcoin. First is public key cryptography . Each coin is associated with its current owner's public ECDSA key. When you send some bitcoins to someone, you create a message ( transaction ), attaching the new owner's public key to this amount of coins, and sign it with your private key. When this transaction is broadcast to the bitcoin network, this lets everyone know that the new owner of these coins is the owner of the new key. Your signature on the message verifies for everyone that the message is authentic. The complete history of transactions is kept by everyone, so anyone can verify who is the current owner of any particular group of coins. This complete record of transactions is kept in the block chain , which is a sequence of records called blocks . All computers in the network have a copy of the block chain, which they keep updated by passing along new blocks to each other. Each block contains a group of transactions that have been sent since the previous block. In order to preserve the integrity of the block chain, each block in the chain confirms the integrity of the previous one, all the way back to the first one, the genesis block . Record insertion is costly because each block must meet certain requirements that make it difficult to generate a valid block. This way, no party can overwrite previous records by just forking the chain. To make generating bitcoins difficult the Hashcash cost-function is used. Hashcash is the first secure efficiently verifiable cost-function or proof-of-work function. The beauty of hashcash is that is is non-interacti Continue reading >>

Does Bitcoin Use Encryption?

Does Bitcoin Use Encryption?

No, Bitcoin does not use encryption. It is called cryptocurrencybecause its digital signature algorithm uses the samemathematical techniques that are used for a type of encryption based on elliptic curves . (In particular Bitcoin uses the ECDSA algorithm with elliptic curve secp256k1 .) For both encryption and digital signatures, each user of the system generates apair of keys: a public key and a private key. The public and private keysare mathematically related, but (as far as we know) it is computationallyinfeasible to derive the private key from the public key. Briefly,public/private key encryption and digital signatures work as follows: If Alice wants to encrypt a short message to Bob, Alice uses Bob's public keyto encrypt the message, and then Bob uses his private key to decrypt themessage. If Alice wants to digitally sign a short message, Alice uses her private key toproduce a signature, and then anyone who knows Alice's public key can verifythat the signature could only be produced by someone who knows Alice's privatekey. In the case of the Bitcoin ledger, each unspent transaction output(UTXO) is usually associated with a public key. If Alice has an UTXOassociated with her public key, and she wants to send the money to Bob, thenAlice uses her private key to sign a transaction that spends the UTXO, creatinga new UTXO associated with Bob's public key. Continue reading >>

Bitcoin Hash Functions Explained - Coindesk

Bitcoin Hash Functions Explained - Coindesk

Anyone with an interest in bitcoin will have heard the phrase 'cryptographic hash function' at some time or other. But what exactly does it mean, and how is it connected to cryptocurrency? Hash functions are an essential part of, not only of the bitcoin protocol, but of information security as a whole. In the following article we'll take a look at some simple examples of how they work, with a simple demonstration, too. In the abstract, a hash function is a mathematical processthat takes input data of any size, performs an operation on it, and returns output data of a fixed size. In a more concrete example, this can be used to take a sequence of letters of any length as input what we call a string and return a sequence of letters of a fixed length. Whether the input string is a single letter, a word, a sentence, or an entire novel, the output called the digest will always be the same length. Acommon use of this kind of hash function is to store passwords. When you create a user account with any web service which requires a password, the password isrun through a hash function, and the hash digest of the message is stored. When you type in your password to log in, the same hash function is run on the word you've entered, and the server checks whether the result matches the stored digest. This means that if a hacker is able to access the database containing the stored hashes, they will not be able to immediately compromise all user accounts because there is no easy way to find the password which producedany given hash. You can experiment with hash values using Python, a programming language installed on Mac and Linux operating systems by default. (This tutorial will assume you're using some version of either OS X or Linux, as using Python on Windows is more complicated .) Continue reading >>

What Is Public Key Cryptography And How Does It Relate To Bitcoin?

What Is Public Key Cryptography And How Does It Relate To Bitcoin?

the intersection of finance and technology In this post we will take a closer look at the magic of cryptography and how it features in Bitcoin. Bitcoin begins with public key cryptography As Ive touched on in my previous posts, the Bitcoin protocol is essentially a record of transactions between addresses. For simplicities sake you can think of an address as being akin to an online bank account. The Bitcoin ledger contains records of the coins that each address has sent and received. But what actually is an address? Public key cryptography was published in the 1970s and provides a method for asynchronous encryption and decryption of information. Traditional encryption protocols are synchronous which basically means that the same key is used to both encrypt and decrypt information. This works fine if you have a mechanism for securely sharing that private key between relevant parties, for example in person. However, its utility breaks down if you have no secure method to share. An excellent example of this is communication over the internet. If you wish to privately communicate with someone you trust by encrypting your data before sending it to them, how do you let them know the key to decrypt if you cant meet them in person? In an email? Via a phone call? In the post? Each of those methods is utterly insecure and therefore your private key is likely exposed to interception. The effect is the process is essentially void and barely any better than having no encryption in the first place. The genius of public key cryptography is that it utilises two encryption keys. The first key, known as the public key, is used to encrypt information. It can be publicly shared with anyone, for example over the internet. The second key, known as the private key, is used to decrypt informa Continue reading >>

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