What Is Blockchain?

First, let’s talk about blockchain. Imagine a blockchain as a digital notebook. Everyone can see it, but no one can change it. It’s a shared record of all transactions across several computers. A usual database is managed by one entity, but a blockchain is shared across many parts.

Transactions are grouped into blocks. Each block connects to the one that comes before it in a chain. This design makes it very tough to change or remove data once added to the blockchain, keeping everything transparent and honest.

What Is Encryption?

Encryption is converting data into a coded format to prevent unauthorized access. It secures data by ensuring that only authorized parties can read or access it.

Encryption supports three key principles in digital security:

1. Confidentiality: Encoding the date ensures that sensitive information remains private.
2. Integrity: Encryption ensures that the data is not altered during transmission.
3. Authenticity: The sender or recipient can be verified.

Encryption relies on encryption keys, which come in two forms: public and private keys. In asymmetric encryption, the public key encrypts the data, while the private key decrypts it, ensuring that only the intended recipient can access the information.

Beyond blockchain, encryption is widely used in various areas of digital security, including securing emails, messaging apps, and online transactions. It is a cornerstone of protecting personal and sensitive data in the digital world.

How Does Blockchain Encryption Work?

Blockchain encryption combines cryptographic techniques with distributed ledger technology to secure transactions and maintain trust in a decentralized system.

Cryptographic methods, like hashing and digital signatures, verify transactions and confirm their authenticity without a central authority.

This system of encryption secures data and ensures its immutability and traceability. Once recorded, data cannot be altered without altering all subsequent blocks, making blockchain highly resistant to tampering.

Encrypting the Data (Hashing)

Hashing converts data into a fixed-length string of characters, known as a hash. Blockchain leverages hashing to verify data integrity without revealing the original information.

For example, the SHA-256 hashing algorithm, widely used in Bitcoin, ensures the security of transactions by hashing data into a unique 256-bit string. If any part of the data changes, even by a single character, the hash changes dramatically, signaling potential tampering.

Other examples of hashing algorithms used in blockchain include Keccak-256 (used in Ethereum) and RIPEMD-160 (used in Bitcoin for hashing public keys). These cryptographic hashes ensure that the data within a block is secure and cannot be altered without detection.

Securing Ownership (Public Key Encryption)

Public and private key encryption is fundamental to blockchain’s security. In this system, a public key is used to encrypt data, while a corresponding private key is required to decrypt it.

The public key is shared openly to facilitate secure transactions, but the private key remains confidential. Only the keyholder can authorize transactions and confirm ownership, ensuring that only the rightful owner can access or transfer their assets.

Read our guide on public and private keys and how they work in blockchain to learn more about their differences. By securing ownership with private keys, blockchain ensures that transactions are authorized only by the rightful owners, maintaining the system’s integrity.

Limiting the Blocks (Using Hashes)

Each block in a blockchain contains a hash from the previous block, securely linking them together. This interconnected structure prevents tampering since altering data within a block would require recalculating all the subsequent hashes.

This recalculation process is computationally expensive and nearly impossible in large networks, making the blockchain highly secure.

This hashing mechanism is fundamental to maintaining the integrity of the blockchain. It ensures that once a block is added, it cannot be changed without breaking the chain. Any attempt to tamper with a block immediately invalidates the following blocks, making it easy to detect any alterations.

Symmetric Encryption vs Asymmetric Encryption

Symmetric encryption uses the same key for both encrypting and decrypting data. This makes it fast and efficient but requires secure key management because anyone with the key can access the encrypted data. It’s often used when speed and simplicity are prioritized, such as encrypting local files or securing network communications in private environments.

Conversely, asymmetric encryption uses a pair of keys: a public key for encryption and a private key for decryption. This allows for more secure communications because the public key can be shared openly, while the private key remains confidential and is only accessible to the intended recipient.

Blockchain technology primarily relies on asymmetric encryption to ensure the security of transactions. In this context, public keys encrypt transaction data, while private keys confirm ownership and authorize transactions.

Due to its robust security, asymmetric encryption is used in more complex systems than symmetric encryption. Examples include blockchain, email encryption (e.g., PGP), and securing digital communications over the Internet (e.g., HTTPS).