When it comes to digital security, encryption is key (pun intended). By converting data into complicated code that can only be decoded with a specific “key”, it’s possible to keep __digital data secure__ without the need for a central authority.

This concept is called cryptography and, as you can probably guess, it’s right at the core of cryptocurrency and Web3.

**In this article, we’ll take a closer look at cryptography basics and the kinds of keys used to decode data. **

## Understanding cryptography

The simplest definition of cryptography is the practice of encrypting data in order to securely communicate information between parties.

The more complicated definition is that it’s the study of mathematical techniques related to aspects of information security, such as data confidentiality, data integrity, entity authentication, and data non-repudiation.

Typically, data is encrypted in two ways:

**Symmetric encryption**: the same key is used to encrypt and decrypt data.**Asymmetric encryption**: two different keys are used to encrypt and decrypt data.

Most cryptocurrencies use asymmetric encryption, with a private-public key pair (we’ll explain what this is shortly) to read and write transactions on the blockchain.

## What is a public key?

A public key (also known as "public address") is a cryptographic key used to receive cryptocurrency. It’s similar to your bank account number, which people use to send you money.

Your public key is mathematically derived from your private key, and it is safe to share with others. In fact, you need to share your public key if you want people to send you cryptocurrency.

## What is a private key?

A private key (sometimes called a "secret key") is a cryptographic key used to sign cryptocurrency transactions. It’s similar to your PIN number, which you use to access your bank account.

Your private key should never be shared with anyone, as it’s the only way to access your crypto assets. If you lose your private key, you’ll lose your assets too.

## How are public and private keys related?

As we mentioned earlier, a public key is mathematically derived from a private key.

More specifically, a public key is the result of applying a one-way mathematical function to a private key. This function is designed in a way that makes it very difficult, if not impossible, to determine the private key with just the public key.

This is called a private-public key pair. It’s how you can share your public key with anyone, and they can use it to send you cryptocurrency, but they can’t use it to find out your private key and access your wallet.

It’s this encryption mechanism that makes cryptocurrencies secure. Even if someone were to hack into your computer, they couldn’t access your cryptocurrency without your private key.

## Differences between public and private keys

While public and private keys are related, they aren’t the same. Here’s a quick run through of their main differences.

A public key is generated from a private key through a one-way mathematical function, so it’s impossible to reverse the process and get the private key from the public key.

A public key can be shared with anyone, whereas a private key must be kept secret.

A public key is used to receive cryptocurrency, whereas a private key is used to sign transactions and send cryptocurrency.

A public key is like a bank account number, whereas a private key is like a PIN number.

Your private key should never be shared with anyone, as it’s the only way to access your cryptocurrency.

If you lose your private key, you’ll lose your cryptocurrency. But if you lose your public key, it can be retrieved from the blockchain's ledger.

Public keys are usually generated by a

__software wallet__, whereas private keys are usually generated by the user like a password to a secret message.

## Benefits of public key encryption

The main benefit of private-public key encryption is that it allows people to communicate securely, even if they have never met before.

For example, imagine that Alice wants to send Bob some cryptocurrency. If they were using symmetric encryption, Alice would need to know Bob's cryptographic key in order to encrypt the transaction.

If they are using asymmetric encryption, though, then Alice can simply look up Bob's public key on the blockchain and use that to encrypt the transaction. Bob would then use his corresponding private key to decrypt the transaction.

Similarly, if Alice wanted to send Bob a message, she could again look up his public key and use that to encrypt the message, and Bob can decrypt it with his private key.

Because it’s almost impossible to derive a private key from a public key, only the person with the corresponding private key can decrypt messages or transactions that are encrypted with the public key – and that’s why the system works.

So private-public key encryption ensures:

**Confidentiality**: only the intended recipient can decrypt the message**Authenticity**: the sender's identity can be verified**Integrity**: the message cannot be altered without changing the encrypted version

## Drawbacks of public key encryption

There are a few drawbacks of public key encryption to consider.

### Longer time to compute

The main disadvantage of private-public key encryption is that it can be slow and resource-intensive.

This is because the algorithms used for private-public key encryption are much more complex than those used for symmetric encryption. As a result, they can take longer to compute, and require more processing power.

### Cipher text is expanded

The cipher text (the encrypted message or transaction) from public key cryptography can be significantly larger than the original plain text.

This is because public keys are typically much longer than private keys, and they need to be included in every encrypted message or transaction.

This can be a problem for cryptocurrency networks, which can struggle to handle large volumes of traffic.

### Not suitable for large data sets

Another disadvantage of private-public key encryption is that it isn’t well suited for encrypting large data sets.

This is because the public and private keys are usually generated together, meaning they are the same size. If you want to encrypt a large data set, you’d need a much larger key.

As a result, private-public key encryption can be impractical for many applications.

**This is why many cryptocurrencies use a hybrid system that combines private-public key encryption with symmetric encryption and hashing algorithms.**

## What is hybrid encryption?

Hybrid encryption is a technique that combines both symmetric and asymmetric encryption.

It’s typically used when speed and efficiency are important, but security is also a priority. E-commerce websites are good examples of this—they need to encrypt large amounts of data, but should also be fast and responsive.

But how does it work? Well, a small amount of data is first encrypted with a public key. This is known as the "session key".

The session key is then used to encrypt the rest of the data using symmetric encryption. The session key is also encrypted with a public key, so that it can only be decrypted by the corresponding private key.

This system is much faster than public-private key encryption, while still offering good security.

The downside, though, is that if the session key is compromised, the rest of the data can be decrypted—so keeping the session key completely secure is paramount.

## Hashing algorithms and hybrid encryption

If a session key has to be a small piece of data, how do you make sure it’s the right size?

Hash algorithms.

A hash algorithm is a mathematical function that takes an input of any size and produces an output of a fixed size. The output is known as a "hash" or "digest".

Hashing algorithms are often used to store passwords because they can take any size input and produce a fixed-size output. This means that the password can be stored in a database without taking up too much space.

Hash algorithms are used in __cryptocurrency wallets__ to generate addresses.

There are lots of different types of hashing algorithms. Bitcoin, for example, uses the __SHA-256__ hashing algorithm.

When you want to send Bitcoin to someone, you need their address, but to save the impracticality of typing out a long and complicated one, you can use a hash of it. This is called a “bitcoin address” or “address hash”.

## Real-world applications of public key encryption

You may not know it, but you interact with private-public key encryption several times a day. It’s a system used across a wide variety of applications. Here’s just a few of them.

### Digital signatures

Digital signatures are a way of proving that a piece of data has come from a specific person or entity. They are commonly used to protect the authenticity of documents, such as contracts.

A digital signature is created by combining the data with a private key. This produces a "signature" that can be verified using the corresponding public key.

If the digital signature is valid, this proves that the data came from the owner of the private key.

### Secure Sockets Layer (SSL) / Transport Layer Security (TLS)

SSL (Secure Sockets Layer) and TLS (Transport Layer Security) are protocols that are used to encrypt data that is being transmitted over the internet.

They are commonly used on websites to protect user data, such as login details and credit card information.

When you see a website that has "https://" in the URL, this means it is using SSL/TLS.

### Email encryption

Email encryption is a way of protecting the privacy of your emails. It works by encrypting the contents of your email with a public key so that only the intended recipient can decrypt it using their private key.

### Secure Socket Shell (SSH)

SSH (Secure Socket Shell) is a protocol that is used to connect to remote servers. It uses public-private key encryption to authenticate users and encrypt data that is being transmitted.

### Virtual Private Networks (VPNs)

VPNs (Virtual Private Networks) are used to encrypt data that is being transmitted over the internet. They are commonly used by businesses to protect sensitive data, such as customer information and confidential documents.

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