Encryption: the Cornerstone of Cryptocurrencies

Dubai, UAE, 5th May 2024, Cryptography is an interdisciplinary field that intersects mathematics, computer scientists, information security experts, and many others. Its primary focus is on data privacy and integrity, which are vital for the security of users and the information they share in most imaginable apps and platforms. Naturally, cryptography is also extensively utilized in the crypto field, giving the latter its name.

Cryptography & Encryption

The developments and improvements in cryptography and encryption have been impressive throughout the years. This transformation highlights the continuous demand for improved security measures. Modern blockchain networks utilize sophisticated algorithms that depend on various encryption methods to protect digital assets and private information.

Encryption involves using ciphers to turn human and machine-readable plaintext into unreadable ciphertext. Plaintext refers to any easily readable or understandable data that anybody can thus access. Encrypting it into ciphertext provides an extra layer of security by making it unreadable to unauthorized individuals. This way, sensitive and confidential information cannot be easily intercepted and read if relayed over the Internet.

Encryption keys are the critical components of ciphering and deciphering any transferred information. Encryption types are often distinguished based on the number of keys used. Symmetric encryption rely on one secret key for both encryption and decryption, while asymmetric one utilizes a secret, private key along with a public one. Therefore, the latter is considered more advanced security-wise.

Encryption in Crypto

Encryption plays an essential role in cryptocurrencies, enabling their secure, decentralized, privacy-preserving nature. Blockchain was initially designed with the aim of establishing safe communication between parties, with cryptography and hashing being the two fundamental concepts underpinning it. Cryptography is implemented to encrypt messages in peer-to-peer networks, while hashing is utilized to safeguard data on the block and connect the blocks within a blockchain.

Hashing contributes to the security and immutability of blockchains. It is employed to code the information into an unreadable, unchangeable, and unhackable text. Unlike the traditional, key-based encryption methods, hashing uses a cipher to turn the plaintext into a distinctive and unique string of text of a fixed length. Detecting threats in a blockchain is made easier and faster by the fact that even a small alteration in the input data can produce an entirely different output. This characteristic ultimately leads to an elevation in the overall security of the blockchain.

With the development of cryptology, many new techniques, methods, and algorithms appeared that targeted different shortcomings of original methods. For instance, Elliptic Curve Cryptography (ECC) was designed to maximize the efficiency of asymmetric cryptographic methods. By taking advantage of the mathematical properties of elliptic curves over finite fields, ECC is able to offer the same level of security as orthodox asymmetric algorithms but with smaller key sizes. This allows for a higher degree of efficiency and compactness, which are highly useful for the creation of a more secure and lightweight transaction authentication.

Zero-knowledge proofs (ZK proofs) is another widely discussed direction of encryption development that is revolutionizing the DeFi space by bringing privacy and security to a new level. A ZK proof is a cryptographic method used to prove the truth of a given statement to one party by another party without disclosing any personal information at all. ZK proofs are currently receiving high interest from the crypto community, searching for ways to ensure the DeFi industry’s decentralization and security. The most prevalent ZK algorithms include zk-SNARKs and zk-STARKs. These algorithms are increasingly incorporated into DeFi projects to enable more confidential, secure, and efficient trading.


Encryption lies at the heart of cryptography, providing the essential mechanisms for securing transactions, communications, and digital assets in the realm of cryptocurrency. By understanding the principles and functionalities of these encryption techniques, blockchain developers, cryptocurrency users, and security professionals can effectively safeguard their digital assets and ensure the integrity and confidentiality of their transactions on the blockchain.

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Disclaimer: The views, suggestions, and opinions expressed here are the sole responsibility of the experts. No Finance Zeus journalist was involved in the writing and production of this article.