{"id":635185,"date":"2025-03-13T11:11:06","date_gmt":"2025-03-13T11:11:06","guid":{"rendered":"https:\/\/insidebitcoins.com\/?page_id=635185"},"modified":"2025-03-13T11:16:18","modified_gmt":"2025-03-13T11:16:18","slug":"what-is-encryption-in-crypto-a-simple-guide","status":"publish","type":"page","link":"https:\/\/insidebitcoins.com\/crypto\/what-is-encryption-in-crypto-a-simple-guide","title":{"rendered":"What Is Encryption in Crypto? A Simple Guide"},"content":{"rendered":"\n
Encryption has helped shape human civilization for over 4,000 years, evolving from simple ciphers on the tombs of Pharaohs to the advanced encryption algorithms that secure our entire digital world today. Modern encryption is more than just codes and algorithms. It’s a blossoming field of technology that forms the foundation of not just secure messaging but cryptocurrencies, financial transactions, nation-state cybersecurity, and much more.<\/p>\n\n\n\n
However, few onlookers outside of the cryptography world know exactly how it works and how essential it is in modern life.<\/p>\n\n\n\n
Encryption is a powerful mathematical method used to protect data of any kind by converting it from a readable format to a code or ciphertext. This makes it (ideally) impossible for third parties without the proper encryption key to access and read said data.<\/p>\n\n\n\n
Encryption can be as simple as the 2,000-year-old Caesar cipher, where you shift each letter by a certain number to encode a message, or as complex as modern cryptographic mathematical models such as AES-256, which uses convoluted algorithms and billions of possible keys to secure data.<\/p>\n\n\n\n Encryption is a process that protects original information by transforming it into an unreadable format using a mathematical formula. Imagine inventing a secret language to use with your friends that is unrecognizable to anyone who doesn’t have the right “key” to decode it. That would be a simple form of encryption.<\/p>\n\n\n\n When information is encrypted, two kinds of keys are often generated: the private key and the public key. The public key is the coded message, which can be shared openly. The private key is the only way to reverse the encryption back into the original information, and it must be kept secret and secure. If anyone obtains both the private and public keys, they will be able to decode the information with ease.<\/p>\n\n\n\n There are two main types of encryption: symmetric encryption and asymmetric encryption. Asymmetric encryption, which was detailed above, uses both a private key and a public key. The public key is used for encryption, whereas the private key is used for decryption, which is why it must be kept secret.<\/p>\n\n\n\n Symmetric encryption, on the other hand, only uses one key. This key is used both for encryption and decryption, so it must also remain confidential at all times. Symmetric encryption is generally much faster and more efficient, though secure key distribution is more difficult given that it uses the same key for encryption and decryption. Both types of encryption algorithms are popular in the crypto industry and in general, depending on the use case.<\/p>\n\n\n\n Here are some of the most common encryption algorithms that you have almost certainly already used, whether you knew it or not:<\/p>\n\n\n\n Encryption is one of the foundational technologies that enable cryptocurrencies and secure blockchains. While it is useful in ensuring privacy and security in crypto, it can also make well-designed blockchains essentially tamper-proof.<\/p>\n\n\n\n Bitcoin<\/a> uses asymmetric encryption (ECC) to generate private and public keys for crypto wallets. As long as you keep your private key secure and confidential, no one except you can access your wallet. However, Bitcoin’s transaction security relies on cryptographic hashing instead of encryption, preventing double-spending and ensuring transparency without sacrificing anonymity.<\/p>\n\n\n\n Hashing<\/a> is a foundational process in blockchain technology that is often confused with encryption. It provides the security, trust, and integrity for every single cryptocurrency network in use today.<\/p>\n\n\n\n Instead of transforming readable data into encrypted data and back, hashing takes a certain input and then processes it into a unique output of a fixed-length, known as a hash. Each and every unique input generates a unique hash, even when only miniscule changes are made (such as capitalizing a letter).<\/p>\n\n\n\n This is vital for network security because it ensures that no transaction can be altered or duplicated. While every cryptocurrency network uses hashing as a form of security, they often use different hashing algorithms and mechanisms. For example, Bitcoin uses the Proof-of-Work (PoW) consensus mechanism, where network participants randomly guess hashes until they find a valid one, securing the blockchain and adding a new block.<\/p>\n\n\n\n On the other hand, Ethereum uses a Proof-of-Stake (PoS) consensus mechanism, where validators who stake ETH<\/a> are randomly selected to verify transactions and add new blocks to the blockchain. Using this random selection mechanism avoids requiring millions of miners to use an unbelievable amount of electricity to generate countless random hashes like Bitcoin does. However, hashing is still central to Ethereum’s transaction validation and block finalization mechanisms.<\/p>\n\n\n\n Encryption is undoubtedly an important technology that has enabled a blossoming ecosystem of secure products, networks, and platforms of various kinds. However, it can also be used for malicious purposes. For example, hackers use encryption algorithms in ransomware attacks, locking away your precious data behind a paywall.<\/p>\n\n\n\n Poor use of encryption can also be problematic as it may create a false sense of security. If a bad actor is able to obtain essential cryptographic keys, they may be able to take total control over whatever the encryption is intended to protect. This is one of the most common methods that hackers use to drain crypto wallets.<\/p>\n\n\n\n First, the hacker will use various techniques, such as social engineering or basic phishing, to obtain your crypto wallet’s secret phrase (which contains your cryptographic key). Once they extract it, they can usually gain access to your wallet or wallets and drain them in milliseconds.<\/p>\n\n\n\n If you have been following tech news for the past few years, you have almost certainly seen headlines warning about the impact of quantum computing on encryption. Quantum computers have the capability to solve certain encryption algorithms exponentially faster than regular computers, potentially threatening all kinds of previously secure systems. However, the new tech might not be as big of a threat to encryption than these headlines suggest.<\/p>\n\n\n\n Quantum computing is still in its infancy, with a myriad of towering practical hurdles<\/a> to overcome before it becomes a true threat to widespread encryption. For example, it is extremely difficult and expensive to build even the smallest quantum computers because they need to be kept at extraordinarily low temperatures with expensive infrastructure at all times.<\/p>\n\n\n\n The largest quantum computer scientists have built so far only has 1,180 qubits, which is vanishingly small compared to the billions or trillions of bits in a regular computer. While each qubit can be exponentially faster and more efficient than normal bits, quantum computers simply don’t have enough of them to beat normal computers yet<\/em>.<\/p>\n\n\n\n Encryption is the backbone of digital security in the modern day, protecting sensitive data of all kinds, from financial transactions and banking to top-secret military data and personal information. Without it, the internet as we know it today would simply not exist as it would be impossible to keep data totally secure and confidential.<\/p>\n\n\n\n Cryptocurrencies like Bitcoin, Ethereum, and Solana completely rely on encryption to secure wallets, transactions, and blockchain integrity. Secure messaging and online banking are also completely dependent on modern encryption.<\/p>\n\n\n\n However, modern encryption isn’t entirely foolproof. Countless cybercriminals exploit poor security practices and use social engineering to skirt even the most secure encryption algorithms every day. Additionally, major leaps in quantum computing technology could finally break some of the most popular encryption algorithms, posing a major threat to the security of the internet.<\/p>\n","protected":false},"excerpt":{"rendered":"How Does Encryption Work?<\/h2>\n\n\n\n
What Are The Most Common Encryption Algorithms?<\/h2>\n\n\n\n
Common Asymmetric Encryption Algorithms:<\/h3>\n\n\n\n
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Common Symmetric Encryption Algorithms:<\/h3>\n\n\n\n
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Encryption’s Role In Crypto Explained<\/h2>\n\n\n\n
What Is Hashing in Crypto?<\/h2>\n\n\n\n
How Does Hashing in Crypto Work?<\/h3>\n\n\n\n
The Dark Side of Encryption<\/h2>\n\n\n\n
Does Quantum Computing Really Threaten Encryption?<\/h2>\n\n\n\n
Why Is Encryption Important?<\/h2>\n\n\n\n