Hiding Secrets Through Math – How Cryptography Makes the Blockchain Possible

Blockchain technology would not exist without cryptography. It is not necessary to be a math genius, but any blockchain user or cryptocurrency holder should understand some basic cryptographic primitives. Many coins have been lost or stolen because users did not understand the basics of cryptographic key management.

For a fascinating history of cryptography, “The Code Book” by Simon Singh is highly recommendable. But let’s summarize a few concepts relevant to blockchain technology.

What Does Cryptography Do?

Cryptography solves three problems at once: First of all, it allows secrets to be kept through data encryption. Bob can send a message to Alice through a public network without compromising privacy. Secondly, the origin of the data can be verified. Alice can make sure the message he has received really is from Bob. Finally, Alice can verify that the data sent by Bob is unchanged and has not been modified.

Symmetric versus Asymmetric Cryptography

In modern cryptography, there are two main classes of algorithms. In symmetric cryptography, a single key or passphrase is used. This key has to be kept secret and is shared by those that are to be provided with access to the data. Symmetric encryption is very efficient but is problematic in communication systems. In order for Bob to send a message to Alice, he first has to solve the problem of how to get the key to her. If the key itself is intercepted, all messages are compromised. For this reason, symmetric cryptography is used in applications, such as hard drive encryption, but in communication systems and blockchains, we tend to use asymmetric encryption.

In asymmetric cryptography, a pair of keys is used. Each user has a public key which can be publicly shared, and private key, which has to be kept secret. If Bob wants to send a message to Alice, he uses Alice’s public key to encrypt the message. Only Alice can decrypt the message, using her private key. You can see how messages cannot be compromised through intercepted keys in this system.

Digital signatures

Private keys can also be used to sign data. The matching public key can then be used to verify the data signer or message sender and the integrity of the data.

Transaction signing in blockchains such as Bitcoin and Ethereum, makes use of this functionality. You may have noticed that blockchain systems typically use private and public key pairs for their users. Account numbers are derived from public keys. By signing a transaction the sender can be identified and by addressing a transaction to a certain public key, the owner of the corresponding private key can prove he is the intended recipient.

Digital Fingerprints

There is one more cryptographic primitive essential for blockchains to work. Hashing is a mathematical method to create digital fingerprints of data. An irreversible function is used to calculate a large number (or hash value) that uniquely identifies the data. Should a single bit in the data change, the number changes. This can be used to prove that data has not been tampered with.

Blockchains use this in order to “cryptographically seal” blocks. In Bitcoin, for example, each block of transactions includes an SHA-256 hash value of the previous block. This ensures that any modification of the transaction history can be detected instantly. Bitcoin mining also uses the SHA-256 hashing algorithm for the mining process.

Key Concepts

The above primitives are key concepts every blockchain user should be familiar with. Whilst the underlying math can become quite complicated, the basic functionalities are shared between most blockchains.

 

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Dr. Stefan Beyer
Dr. Stefan Beyer is editor-at-large at BlockTelegraph and a Blockchain consultant and smart contract auditor. He graduated from the University of Manchester in 2001 with a degree in Computer Science and obtained a Ph.D. in 2004 from the same university with the title “Dynamic Configuration of Embedded Operating Systems”. Since then he has worked in computer science research in distributed systems, fault tolerance, ubiquitous computing and cyber security. He is currently working as head of research and development for a medium-sized cyber security company in Spain.

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ShipChain Announces New Projects After NASAA Court Battle

ShipChain logo

ShipChain Plans for Future Following Battle With NASAA

Blockchain company ShipChain is seeing a comeback after a difficult legal battle with the North American Securities Administrators Association.

The association accused ShipChain of dealing in securities while unauthorized and issued a cease and desist order. The company said these allegations were based on misunderstandings of the company’s workings. Since the ruling of the South Carolina Securities Division in its favor, the company has made it a goal to make up for lost time. Now, they have announced the launching of new initiatives for continued growth and enhanced customer experience.

One of these initiatives, Transmission, was released last year. Transmission is a platform designed to work with the blockchain to speed up shipment data searches. Since its release, the platform has required an updated security paradigm to manage encryption and decryption of outside files.

ShipChain sidechain
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Image Credit: ShipChain / shipchain.io

This need led to the development of Engine, which wraps these blockchain interactions behind an internal NodeJS service. Engine allows users to store keys from multiple wallets and authorizes approved third parties to manage blockchain interactions on the user’s behalf. It also securely saves Vault credentials, so users can decrypt PDF attachments along with shipment tracking. Both Transmission and Engine are currently available on ShipChain’s GitHub as beta projects.

ShipChain Offers More Options for Security and Data Storage

ShipChain has also launched a project, called ShipChain Vaults, to overcome the various roadblocks associated with Long-Term Large-Object Storage. Vaults are intended as a temporary measure to solve the problems associated with storing large data on the Ethereum chain, which gives users the option of choosing where and how to store private data. Currently, they’re only available as part of the Engines package, not as a standalone initiative. Users will be able to pay a minimal fee to operators willing to store data in Vaults on their behalf. The company is still deciding whether Vaults will be made available independent of Engines.

Soon, the company also plans to release the hardware and software specs to allow users to make their own ShipChain Gateway Devices. In the meantime, it has begun development of a free Android app called Lite-Client. It offers all the features of the web platform, as well as some GPS Track-and-Trace features. The app is due to launch in 2019.

ShipChain has also announced the development of Loom, a sidechain off the Ethereum blockchain. Loom will allow the company to use an Ethereum-based blockchain while also enabling interchain transfers, all without the typical congestion or occasional high costs. The company says this initiative is part of its dedication to creating a public blockchain based on decentralization, dependent on public validation nodes that pay validators for their work. Loom currently uses delegated Proof-of-Stake, which associates every token with a vote for witnesses. Those who hold the most tokens are made validators and given an income from network transaction fees.

ShipChain is excited to bring all these innovations — and more — to the shipping world.

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What Are the Key Differences Between Bitcoin and Ripple?

ripple

Key Statistics and Goals

Bitcoin was the first cryptocurrency and is still the most popular one, but Ripple is experiencing an increase in popularity. Although both are cryptocurrencies, Bitcoin and Ripple have many factors separating them, which are worthy of comparison. Bitcoin began in 2008 and Ripple was founded in 2012, and they each have a different purpose in their design.

To start off the comparison, look at some important statistics for each currency. At the time of writing, one bitcoin (BTC) was valued at $6,501.95, while one Ripple (XRP) was equal to $$0.281410 USD or 0.00004321 BTC. Bitcoin has a market cap of $122.6 billion USD, while Ripple has a market cap of $11 billion USD. This puts Ripple in the third-highest spot, while Bitcoin is the top-ranked cryptocurrency. The prices of Bitcoin and Ripple are dramatically different, but this clearly does not affect Ripple’s ability to be a crypto leader.

As mentioned, one of the major differences between the two cryptocurrencies is the main goal behind their development. Bitcoin was created to be used as a digital currency to make payments for services and goods. By contrast, Ripple was developed specifically for payment networks and banks to use for currency exchange, money transfers, and payment settlements. Essentially, the team behind Ripple wanted to make real-time direct asset transfers that would be more transparent, secure, and cheaper than the current methods.

This difference in the goals of Bitcoin and Ripple has also led to variations in how they are used. Bitcoin is used like any other currency since that is its primary goal. By contrast, the Ripple network essentially exchanges XRP for other currencies to complete transactions quickly. The Ripple network makes this possible without any intermediaries involved.

Ripple
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Image credit: Worldspectrum/Pexels

Governance Structures

Bitcoin is a decentralized cryptocurrency and open-source. For major decisions to be made, the community must agree. No one even knows who created Bitcoin since the developer used the codename “Satoshi Nakamoto” and has not revealed their identity. The need for consensus to make major changes to Bitcoin has led to soft forks. By contrast, Ripple has a more closed internal ledger, and a private company owns it. The consensus-seeking approach that the company uses is quicker than that of Bitcoin, but it is more centralized. Ripple has an amendment system that developers use to get a consensus before changing the network.

Fees and Transaction Times

Since two of the goals of Ripple are reducing fees and transaction times, it should come as no surprise that there is a difference in these factors for Ripple and Bitcoin. Bitcoin has proven itself unable to easily scale up to meet the growing demand, which has led to transaction fees of up to $27 and an average transaction time of 70 minutes. By contrast, Ripple uses off-ledger transactions that allow for settlement within just four seconds. Additionally, the fee for a Ripple transaction is just a fraction of a cent, and the XRP paid are destroyed, which increases the value of remaining Ripple.

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