Cryptography - what is it and what is its use in cryptocurrencies?

Cryptography and Cryptocurrencies

In recent years, many changes have taken place and are still taking place in the global economy. Some of them are the result of the ongoing digitization and the development of Internet technologies and have a significant impact on the market mechanisms known so far. For example, as a result of these changes, a new phenomenon emerged, namely the creation of virtual currencies. Virtual, i.e. intangible and occurring and valid only in the virtual world, such as the Internet network.

It is impossible not to notice the increasing share of virtual currencies in the economic and social life, and the increase in the number of transactions made through them has an impact on the modern economy.

One of the varieties of internet currencies are cryptocurrencies (cryptocurrencies), an instrument that is used on a large scale by both individual investors and participants in financial markets. In order to define the concept of cryptocurrency, first of all, it is necessary to answer the question of what is cryptography and how it has been applied in the phenomenon of creating cryptocurrencies.

What is cryptography?

Cryptography is the science that deals with encryption (coding). Encryption is the process of making data unreadable to a user who does not have the appropriate key. Cryptography in cryptocurrencies is primarily the use of distributed ledger technology, the so-called blockchain, which can generally be defined as a chain of blocks in which data is stored.

From the IT point of view, it is a decentralized database where transactions are made between alphanumeric addresses of its users. The basic aspect of blockchain network security are advanced cryptographic techniques, such as public and private keys or digital signatures and they are necessary for the functioning of cryptocurrencies.

Cryptography in cryptocurrencies

According to researchers, the use of cryptography (bloockchain technology) in the process of creating or using cryptocurrencies has an impact on the fact that this technology cannot be decoded or broken, and therefore cryptocurrency is referred to as the safest type of currency in the world.

Cryptography in cryptocurrencies plays a key role in the process of their creation and functioning as secure. Digital currencies are assets that are much harder to counterfeit. This is practically impossible, as one code change entails hundreds of thousands of changes throughout the blockchain.