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What is Cryptography?

Discover the types of cryptography and how to minimize the potential risks it poses.

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Cryptography Definition

Cryptography is the process of hiding or coding information so that only the person a message was intended for can read it. The art of cryptography has been used to code messages for thousands of years and continues to be used in bank cards, computer passwords, and ecommerce.

Modern cryptography techniques include algorithms and ciphers that enable the  encryption  and decryption of information, such as 128-bit and 256-bit encryption keys. Modern  ciphers , such as the Advanced Encryption Standard (AES), are considered virtually unbreakable.

A common cryptography definition is the practice of coding information to ensure only the person that a message was written for can read and process the information. This  cybersecurity  practice, also known as cryptology, combines various disciplines like computer science, engineering, and mathematics to create complex codes that hide the true meaning of a message.

Cryptography can be traced all the way back to ancient Egyptian hieroglyphics but remains vital to securing communication and information in transit and preventing it from being read by untrusted parties. It uses algorithms and mathematical concepts to transform messages into difficult-to-decipher codes through techniques like cryptographic keys and digital signing to protect data privacy, credit card transactions, email, and web browsing.

The Importance of Cryptography

Cryptography remains important to protecting data and users, ensuring confidentiality, and preventing cyber criminals from intercepting sensitive corporate information. Common uses and examples of cryptography include the following:

Privacy and confidentiality

Individuals and organizations use cryptography on a daily basis to protect their privacy and keep their conversations and data confidential. Cryptography ensures confidentiality by encrypting sent messages using an algorithm with a key only known to the sender and recipient. A common example of this is the messaging tool WhatsApp, which encrypts conversations between people to ensure they cannot be hacked or intercepted. 

Cryptography also secures browsing, such as with virtual private networks (VPNs), which use encrypted tunnels, asymmetric encryption, and public and private shared keys.

Authentication

Similar to how cryptography can confirm the authenticity of a message, it can also prove the integrity of the information being sent and received. Cryptography ensures information is not altered while in storage or during transit between the sender and the intended recipient. For example, digital signatures can detect forgery or tampering in software distribution and financial transactions.

Nonrepudiation

Cryptography confirms accountability and responsibility from the sender of a message, which means they cannot later deny their intentions when they created or transmitted information. Digital signatures are a good example of this, as they ensure a sender cannot claim a message, contract, or document they created to be fraudulent. Furthermore, in email nonrepudiation, email tracking makes sure the sender cannot deny sending a message and a recipient cannot deny receiving it.

Key exchange

Key exchange is the method used to share cryptographic keys between a sender and their recipient.

FortiGuard Labs Global Threat Landscape Report 2H 2023 shows Cybercriminals Exploiting New Industry Vulnerabilities 43% Faster than 1H 2023.

Types of Cryptographic Algorithms

There are many types of cryptographic algorithms available. They vary in complexity and security, depending on the type of communication and the sensitivity of the information being shared.

Secret Key Cryptography

1. stream ciphers.

Stream ciphers work on a single bit or byte at any time and constantly change the key using feedback mechanisms. A self-synchronizing stream cipher ensures the decryption process stays in sync with the encryption process by recognizing where it sits in the bit keystream. A synchronous stream cipher generates the keystream independently of the message stream and generates the same keystream function at both the sender and the receiver.

2. Block ciphers

Block ciphers encrypt one block of fixed-size data at a time. It will always encrypt a plaintext data block to the same ciphertext when the same key is used. A good example of this is the Feistel cipher, which uses elements of key expansion, permutation, and substitution to create vast confusion and diffusion in the cipher. 

The stages of encryption and decryption are similar if not identical, which means reversing the key reduces the code size and circuitry required for implementing the cipher in a piece of software or hardware.

Public Key Cryptography

RSA was the first and remains the most common PKC implementation. The algorithm is named after its MIT mathematician developers, Ronald Rivest, Adi Shamir, and Leonard Adleman, and is used in data encryption, digital signatures, and key exchanges. It uses a large number that is the result of factoring two selected prime numbers. It is impossible for an attacker to work out the prime factors, which makes RSA especially secure.

2. Elliptic Curve Cryptography (ECC)

ECC is a PKC algorithm based on the use of elliptic curves in cryptography. It is designed for devices with limited computing power or memory to encrypt internet traffic. A common use of ECC is in embedded computers, smartphones, and cryptocurrency networks like bitcoin, which consumes around 10% of the storage space and bandwidth that RSA requires.

3. Digital Signature Algorithm (DSA)

DSA is a standard that enables digital signatures to be used in message authentication. It was introduced by the National Institute of Standards and Technology (NIST) in 1991 to ensure a better method for creating digital signatures.

4. Identity-based Encryption (IBE)

IBE is a PKC system that enables the public key to be calculated from unique information based on the user’s identity, such as their email address. A trusted third party or private key generator then uses a cryptographic algorithm to calculate a corresponding private key. This enables users to create their own private keys without worrying about distributing public keys.

5. Public Key Cryptography Standards (PKCS)

All PKC algorithms and usage are governed by a set of standards and guidelines designed by RSA Data Security. These are as follows:

• PKCS #1 or RFC 8017: RSA Cryptography Standard
• PKCS #3: Diffie-Hellman Key Agreement Standard
• PKCS #5 and PKCS #5 v2.1 or RFC 8018: Password-Based Cryptography Standard
• PKCS #6: Extended-Certificate Syntax Standard (being replaced by X.509v3)
• PKCS #7 or RFC 2315: Cryptographic Message Syntax Standard 
• PKCS #8 or RFC 5958: Private Key Information Syntax Standard
• PKCS #9 or RFC 2985: Selected Attribute Types
• PKCS #10 or RFC 2986: Certification Request Syntax Standard
• PKCS #11: Cryptographic Token Interface Standard
• PKCS #12 or RFC 7292: Personal Information Exchange Syntax Standard 
• PKCS #13: Elliptic Curve Cryptography Standard
• PKCS #14: Pseudorandom Number Generation Standard
• PKCS #15: Cryptographic Token Information Format Standard

6. Diffie-Hellman and Key Exchange Algorithm (KEA)

The Diffie-Hellman algorithm was devised in 1976 by Stanford University professor Martin Hellman and his graduate student Whitfield Diffie, who are considered to be responsible for introducing PKC as a concept. It is used for secret key exchanges and requires two people to agree on a large prime number. 

KEA is a variation of the Diffie-Hellman algorithm and was proposed as a method for key exchange in the NIST/National Security Agency’s (NSA) Capstone project, which developed cryptography standards for public and government use.

Hash Function

Hash functions ensure that data integrity is maintained in the encryption and decryption phases of cryptography. It is also used in databases so that items can be retrieved more quickly. 

Hashing is the process of taking a key and mapping it to a specific value, which is the hash or hash value. A hash function transforms a key or digital signature, then the hash value and signature are sent to the receiver, who uses the hash function to generate the hash value and compare it with the one they received in the message. 

A common hash function is folding, which takes a value and divides it into several parts, adds parts, and uses the last four remaining digits as the key or hashed value. Another is digit rearrangement, which takes specific digits in the original value, reverses them, and uses the remaining number as the hash value. Examples of hash function types include Secure Hash Algorithm 1 (SHA-1), SHA-2, and SHA-3.

Types of Cryptographic Key Attacks and Risks

1. weak keys.

Keys are essentially random numbers that become more difficult to crack the longer the number is. Key strength and length need to be relative to the value of the data it protects and the length of time that data needs to be protected. Keys should be created with a high-quality, certified random number generator that collects entropy—the information density of a file in bits or characters—from suitable hardware noise sources.

2. Incorrect use of keys

When keys are used improperly or encoded poorly, it becomes easier for a hacker to crack what should have been a highly secure key.

3. Reuse of keys

Every key should only be generated for a specific single-use encrypt/decrypt purpose, and use beyond that may not offer the level of protection required.

4. Non-rotation of keys

Keys that are overused, such as encrypting too much data on a key, become vulnerable to attacks. This is particularly the case with older ciphers and could result in data being exposed. Keys need to be rotated, renewed, and updated when appropriate.

5. Inappropriate storage of keys

Storing keys alongside the information they have been created to protect increases their chances of being compromised. For example, keys stored on a database or server that gets breached could also be compromised when the data is exfiltrated.

6. Inadequate protection of keys

Huge cyberattacks like Meltdown/Spectre and Heartbleed have been capable of exposing cryptographic keys stored in server memory. Therefore, stored keys must be encrypted and only made available unencrypted when placed within secure, tamper-protected environments, or even kept offline.

7. Insecure movement of keys

Moving keys between systems should only occur when the key is encrypted or wrapped under an asymmetric or symmetric pre-shared transport key. If this is not possible, then the key must be split up into multiple parts that are kept separate, re-entered into the target system, then destroyed.

8. Insider threats (user authentication, dual control, and segregation of roles)

Insider threats are one of the most serious threats posed to any key. This is most likely to occur through a rogue employee having access to a key, then using it for malicious purposes or giving or selling it to a hacker or third party.

9. Lack of resilience

Resilience is vital to protecting the availability, confidentiality, and integrity of keys. Any key that suffers a fault with no backup results in the data the key protects being lost or inaccessible.

10. Lack of audit logging

Key life cycles must be logged and recorded in full to ensure any compromise can be tracked and enable subsequent investigations to occur smoothly.

11. Manual key management processes

Recording key management processes manually on paper or spreadsheets runs the risk of human error and makes the keys highly vulnerable to attack or theft.

How to Minimize the Risks Associated with Cryptography

Organizations and individuals can minimize and mitigate cryptography-related threats with a dedicated electronic key management system from a reputable provider. The solution must use a hardware security module to generate and protect keys, and underpin the entire system’s security. 

It needs to include features like full key management life cycle, strong key generation, strict policy-based controls, swift compromise detection, secure key destruction, strong user authentication, secure workflow management, and a secure audit and usage log. This will protect the organization's keys, enhance efficiency, and ensure compliance with data and privacy regulations. 

Another potential solution is cryptography quantum, whereby it is impossible to copy data encoded in a quantum state.

Cryptography FAQs

1. what do you mean by cryptography.

In computer science, cryptography is the collection of secure information and communication techniques employing mathematical concepts and algorithms used to disguise the content of messages.

3. What are the three types of cryptography?

The three types of cryptography are:

• Secret key cryptography
• Public key cryptography
• Hash function cryptography

3. What is an example of cryptography

The Rivest-Shamir-Adleman (RSA) algorithm is widely used on the Internet. RSA uses a pair of keys to encrypt and decrypt information.

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What Is Cryptography and Why Is It Important?

Cryptography is everywhere.

It has become an integrated layer of defense within all of the digital transformation initiatives now collectively referred to as digital business. As the foundation of modern security systems, cryptography is used to secure transactions and communications, safeguard personal identifiable information (PII) and other confidential data, authenticate identity, prevent document tampering, and establish trust between servers. Cryptography is one of the most important tools businesses use to secure the systems that hold its most important asset – data – whether it is at-rest or in-motion. Data is vital information in the form of customer PII, employee PII, intellectual property, business plans, and any other confidential information. Therefore, cryptography is critical infrastructure because increasingly the security of sensitive data relies on cryptographical solutions.

Weak or hidden crypto can expose critical infrastructure to vulnerabilities. Public attention to exposed data leads to brand erosion. This modern environment requires organizations to pay attention to how cryptography is being implemented and managed throughout the enterprise.

When wrapped within the invisible layers that form cryptography, sensitive data becomes unreadable and unmodifiable, preventing bad actors from carrying out nefarious activity. The core elements that make the cryptographic layers safe include algorithms, keys, libraries, and certificates as described here:

• Cryptographic Keys are used in conjunction with cryptographic algorithms to protect sensitive information. Cryptographic keys must use an appropriate key length as defined by  NIST  (National Institute of Standards and Technology) and private keys must be kept secret to be effective. Relying on insecure keys or disclosing secret keys makes cryptography obsolete.
• Digital Certificates are used to maintain trust between connected digital components. Digital certificates need to be properly managed to ensure that the use of compliant algorithms and key lengths, as well as being renewed prior to expiration to avoid security gaps. Non-compliant or hidden certificates can lead to massive systems outages or data
• Cryptographic Libraries contain an implementation of cryptographic algorithms that can be used by applications developers to protect sensitive information. Cryptographic libraries need to be selected carefully and must be up to date to meet the required security level. Relying on insecure implementation or end-of-life cryptographic libraries can introduce hidden critical vulnerabilities across applications and infrastructure.
• Cryptographic Algorithms are the mathematical foundation that maintain the integrity, confidentiality, and authenticity of sensitive information. Relying on  standardized  and mathematically secure algorithms is mandatory to prevent data disclosure, data tampering, or repudiation.

The topic of cryptography has been gaining popularity over the last few years due to the considerable impact it has when poorly managed, as well as the rise of quantum computing ( post-quantum cryptography ) and new cryptographic regulations. Hidden instances of weak and non-compliant cryptographic mechanisms represent a challenge for enterprises and the security, risk, and compliance teams who secure digital business. Fortunately, tools like our  Cryptography-as-a-Service make compliance and management easy, giving you complete control over the creation, management, and use of your cryptographic keys without the need for your own on-prem experts or hardware security modules (HSMs).

Cryptography is a dynamic and a mandatory component of digital business. Organizations need visibility into their cryptographic instances as well as guidance from not only standards groups such as NIST and  ISO  (International Organization for Standardization), but also the web browsers who control the user interfaces that connect businesses with consumers via secure online communications. Crypto agility is the key to keeping pace with the latest cryptographic compliance requirements, standards, and recommendations that sustain and secure digital business.

The next blog in this series will look at the impact of the  proliferation of cryptography  and we will wrap up this series looking at the importance of  Crypto Agility .

Learn about Entrust’s Cryptographic Center of Excellence (CryptoCoE)

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Diana Gruhn is a Product Marketing Director at Entrust, the brand that keeps the world moving safely by enabling trusted identities, payments, and digital infrastructure around the globe. She has been working in the high technology industry for 10+ years and is enthusiastic about helping businesses stay secure as well as the people who transact with them.

Julien Probst is a cybersecurity professional and entrepreneur with more than 12 years of experience in international business, entrepreneurship and product innovation in high tech and cybersecurity. He is currently head of product at InfoSec Global, an Entrust partner and previously co-founded and led Sysmosoft, a Swiss pioneer in mobile security.

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100 Cryptography Essay Topic Ideas & Examples

Inside This Article

Cryptography is a fascinating field that encompasses the study of secure communication techniques, encryption algorithms, and data protection methods. It plays a crucial role in today's digital world, ensuring the confidentiality, integrity, and authenticity of information. If you're studying cryptography or simply have an interest in the subject, here are 100 essay topic ideas and examples to explore:

• The history of cryptography: From ancient times to modern-day encryption methods.
• The role of cryptography in national security and intelligence agencies.
• The ethical implications of encryption: Balancing privacy and security.
• Cryptography in warfare: How it has been used in military operations throughout history.
• The importance of cryptography in financial transactions and online banking.
• Quantum cryptography: The future of secure communication.
• The impact of cryptography on digital currencies like Bitcoin.
• Cryptography and the protection of personal data in the age of surveillance.
• The role of cryptography in securing cloud computing environments.
• Cryptanalysis: The art of breaking codes and encryption systems.
• The use of cryptography in protecting intellectual property rights.
• Cryptography and the prevention of cybercrime.
• The legal and ethical challenges of government surveillance in the context of cryptography.
• Cryptography and the protection of critical infrastructure systems.
• The role of cryptography in securing e-commerce transactions.
• Encryption algorithms: A comparative analysis of their strengths and weaknesses.
• Cryptography and the challenges of securing IoT (Internet of Things) devices.
• The impact of cryptography on digital forensics and cyber investigations.
• The mathematical principles behind cryptography: Exploring number theory and algorithms.
• The role of cryptography in securing communication networks.
• Cryptography in healthcare: Protecting patient data and medical records.
• The use of cryptography in securing voting systems and elections.
• Cryptography and the protection of sensitive government communications.
• The challenges of implementing cryptography in developing countries.
• The impact of cryptography on the military's command and control systems.
• Cryptography and the protection of intellectual property in the entertainment industry.
• The future of post-quantum cryptography: Developing encryption resistant to quantum computers.
• The role of cryptography in securing social media platforms.
• Cryptography and the protection of personal privacy in the digital age.
• The influence of cryptography on international diplomacy and communication.
• The challenges of implementing cryptography in resource-constrained environments.
• Cryptography and the development of secure messaging applications.
• The impact of cryptography on the evolution of cyber warfare.
• Cryptography and the protection of classified information.
• The role of cryptography in securing online gaming and virtual economies.
• The challenges of balancing encryption and lawful access to information.
• Cryptography and the protection of intellectual property in the pharmaceutical industry.
• The influence of cryptography on the evolution of online privacy laws.
• The role of cryptography in securing smart cities and urban infrastructure.
• The impact of cryptography on the development of blockchain technology.
• Cryptography and the protection of trade secrets in the corporate world.
• The challenges of implementing cryptography in autonomous vehicles and transportation systems.
• Cryptography and the protection of personal health data in wearable devices.
• The role of cryptography in securing the Internet of Medical Things (IoMT).
• The impact of cryptography on securing online education platforms and e-learning.
• Cryptography and the protection of personal identity in digital identity management systems.
• The challenges of implementing cryptography in resource-constrained IoT devices.
• Cryptography and the protection of sensitive information in the legal profession.
• The role of cryptography in securing supply chains and logistics networks.
• The impact of cryptography on securing personal communication devices like smartphones.
• Cryptography and the protection of sensitive information in the energy sector.
• The challenges of implementing cryptography in social welfare and benefit systems.
• Cryptography and the protection of personal data in the hospitality industry.
• The role of cryptography in securing intellectual property in the gaming industry.
• The impact of cryptography on securing online streaming platforms and digital content distribution.
• Cryptography and the protection of personal data in the transportation sector.
• The challenges of implementing cryptography in emergency response systems.
• Cryptography and the protection of personal data in the insurance industry.
• The role of cryptography in securing online marketplaces and e-commerce platforms.
• The impact of cryptography on securing personal data in the tourism industry.
• Cryptography and the protection of sensitive information in the aerospace industry.
• The challenges of implementing cryptography in public transportation systems.
• Cryptography and the protection of personal health data in telemedicine.
• The role of cryptography in securing online dating platforms and applications.
• The impact of cryptography on securing personal data in the beauty and wellness industry.
• Cryptography and the protection of sensitive information in the agricultural sector.
• The challenges of implementing cryptography in smart home systems.
• Cryptography and the protection of personal data in the fashion and retail industry.
• The role of cryptography in securing online food delivery platforms.
• The impact of cryptography on securing personal data in the music industry.
• Cryptography and the protection of sensitive information in the automotive industry.
• The challenges of implementing cryptography in smart grid systems.
• Cryptography and the protection of personal health data in fitness tracking devices.
• The role of cryptography in securing online job platforms and recruitment websites.
• The impact of cryptography on securing personal data in the art and culture industry.
• Cryptography and the protection of sensitive information in the telecommunications sector.
• The challenges of implementing cryptography in smart city transportation systems.
• Cryptography and the protection of personal data in the real estate industry.
• The role of cryptography in securing online music streaming platforms.
• The impact of cryptography on securing personal data in the gaming industry.
• Cryptography and the protection of sensitive information in the banking sector.
• The challenges of implementing cryptography in smart irrigation systems.
• Cryptography and the protection of personal health data in remote patient monitoring.
• The role of cryptography in securing online travel booking platforms.
• The impact of cryptography on securing personal data in the film and entertainment industry.
• Cryptography and the protection of sensitive information in the insurance sector.
• The challenges of implementing cryptography in smart parking systems.
• Cryptography and the protection of personal data in the education industry.
• The role of cryptography in securing online sports streaming platforms.
• The impact of cryptography on securing personal data in the healthcare industry.
• Cryptography and the protection of sensitive information in the retail sector.
• The challenges of implementing cryptography in smart waste management systems.
• Cryptography and the protection of personal health data in digital therapeutics.
• The role of cryptography in securing online ticketing platforms.
• The impact of cryptography on securing personal data in the fashion industry.
• Cryptography and the protection of sensitive information in the hospitality sector.
• The challenges of implementing cryptography in smart building management systems.
• Cryptography and the protection of personal data in the e-learning industry.
• The role of cryptography in securing online dating platforms.
• The impact of cryptography on securing personal data in the food and beverage industry.

These essay topics cover a wide range of industries and sectors where cryptography plays a vital role in protecting sensitive information. Whether you're interested in the technical aspects of encryption algorithms or the ethical implications of cryptography, these topics provide a starting point for your research and analysis.

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Introduction to Cryptography

Lecturer: Tom Roeder Lecture notes by Tom Roeder

Table of Contents

1.1 goals of cryptography, 1.2 hardness, 1.3 one-way functions, 1.4 pseudo-random functions, 1 introduction.

A major goal of cryptography ("hidden writing") is to define and construct operations that write, read, and attest to information using secrets in a way so that principals that do not know the secrets cannot perform the operations. Constructing such operations requires us to come up with functions that are hard to compute, so that, e.g., reading hidden information is hard, or coming up with a signature on a new document is hard. Two examples illustrate these problems in real life.

The first example involves signatures. Each time we write a check or sign a contract or a letter, we create a handwritten signature that supposedly attests to us having marked a document as coming from us. We will say that the signature provides authentication for the document. Of course, as everyone who's ever attended grade school knows, handwritten signatures can be forged, even by industrious children (a fairly weak threat model). Worse, the signature doesn't say anything about the document for which it purports to provide authentication; in fact, it is expected to be the same for every document (banks and other institutions often rely on this property), so carbon paper or scanning technology allows us to sign anything for an principal once we've seen a single instance of that principal's signature. So, the guarantees of handwritten signatures are not very strong; we need similar but stronger attestation functionality for security in real systems.

A better signature scheme would require that a signature for a given document uniquely refer to that document's contents and that it be hard to produce a signature for a given principal except by that principal. In this case, the hard operation is constructing a signature for a document given any number of signatures on other documents.

The second example involves passing secret messages. Many properties that we want from everyday actions can be achieved by operations that hide information. For instance, when the CS 513 staff returns your homework, you might want it to be the case that no-one knows the grade you got. This property is often guaranteed by course management systems like CMS, but we could just post grades in the hallway under some transformation if we could guarantee that it would not reveal the binding from grade to student. Similarly, when you send an email to the course instructor complaining about this lecture or about my bias in grading your homework, you would prefer that I not be able to read the message, even if I have full control of the network along which your message will pass. Even better, you'd really like me not to know anything more than the fact that you sent a message to the instructor (you might not even want me to know that you sent a message, but this is a stronger property than we will discuss in these introductory lectures). A good encryption scheme solves these problems; it allows principals to pass information that only a given principal can read.

Both of the above examples relied on the existence of functions that are easy to compute in some contexts but hard to compute in others. Of course, the notion of "hardness" depends entirely on the threat model. If an adversary has unlimited computational resources, then defending against attacks becomes much more difficult. The notion of computational resources is fundamental in cryptography; we can think of it as the size of and number of computers available to an attacker.

It might be reasonable for you to suppose that other students in CS 513 that are trying to figure out what grade you got only have access to, say, the computers in the MEng lab; on the other hand, when the USA and Russia sign a treaty on nuclear weapons, each side should, in principle, not assume anything at all about how many or how powerful computers the other side has. In such contexts, the safest assumption is that the adversary has unlimited computational resources; think of this as having a computer that can perform an arbitrary number of operations instantly. Amazingly, some functions for encryption and authentication can be found that defend against attacks by adversaries with unlimited computing power, though operations using these functions are normally far less efficient than ones that satisfy weaker properties. Such defenses always depend on the ability of hosts to choose random numbers.

In this course, we will almost always consider defending against adversaries that only have a limited amount of computing power. Usually we say that such adversaries can do an amount of computation that is polynomial (as opposed to exponential) in some security parameter; this parameter also controls the amount of work principals must do to perform the given operation. Under this model, the kind of functions we call computationally hard will be hard to compute except for a very small probability. Unless the adversary makes a lucky guess (which is exponentially unlikely in that same security parameter), their computation will not produce the right answers.

We also limit the adversary as to what actions it can perform in the network: a common model in this domain was proposed by Danny Dolev and Andrew Yao in the early '80s, so it is called the Dolev-Yao model. Dolev-Yao treats computationally hard functions as perfect (having no probability of of being computed): reconciling these two views is a topic of current research, but the results are generally encouraging; much of cryptography can be treated as perfect in many common settings. Dolev-Yao allows adversaries to:

• Insert messages in the network
• Read messages from the network
• Redirect messages in the network

Notice that this threat model allows adversaries to completely control communication channels: any message can be blocked by redirecting it to a principal under the control of the adversary. Note that these assumptions are weaker than the Fair Links assumption in distributed systems (the adversary has more abilities, so we are making weaker assumptions about the adversary), which simply asserts that if an infinite number of messages have been sent, then an infinite number of messages will be received. Under Dolev-Yao, there is no such guarantee.

In many contexts, the Dolev-Yao model is stronger than real-life adversaries. For instance, some online auction or exchange sites suffer from requests from fraudulent purchasers; these sites have been known to prepend warnings to emails sent via internal emailing mechanisms. But if adversaries control the network and can modify any message on it, then these prepended warnings could easily be erased. Since these prepended warnings are normally received even on fraudulent emails, it is clear that this real-life adversary model is weaker than Dolev-Yao.

Solutions to the signature problem fundamentally depend on principals being able to compute something that no one else can compute, but everyone else can check was computed correctly for that principal. For instance, consider a stock broker receiving messages from a client; the broker would like to be able to prove that actions he takes are exactly those requested by the client. To this end, the client publishes a public pair of messages M 1 and M 2 , which correspond to buy and sell for a particular stock for a particular amount (generalizing similar schemes to multiple messages and multiple prices is left as an exercise). The broker can then recognize either message if sent by the client. But when the client sends M i , the broker has no way of proving that the client requested the action associated with M i , since the client could always have claimed to send the other message and, in fact, anyone could have sent the message.

Suppose, however, that the client generates M 1 and M 2 as follows: it chooses two random messages m 1 and m 2 and computes M 1 = f(m 1 ) and M 2 = f(m 2 ) for some agreed-upon function f. Then, when the client wants to send message M 2 , it sends m 2 to the broker, who confirms that M 2 = f(m 2 ). The broker, if challenged, can produce m i to show that the client requested the action corresponding to M i . Obviously, several assumptions are needed to make this scheme work. Note, for instance, that if f is the identity function, then this scheme is no different than the original.

One important assumption for this scheme to work is that it is hard to find m 1 or m 2 given M 1 , M 2 , and f (for instance, if f is the identity function f(x) = x, then this scheme has no more security than the original). Such a function is called a one-way function (OWF). Intuitively, it is easy to compute the function, but hard to compute its inverse.

One-way functions require that, given a random x and y = f(x), it is computationally hard to find an x' (maybe equal to x) such that f(x') = y.

Most of cryptography is based (sometimes rather indirectly) on the existence of one-way functions; unfortunately, one-way functions are not known to exist, though it is known that if one-way functions exist, then P is not equal to NP.

One-way functions do not guarantee that all properties of the input are hidden by the output. In fact, adversaries may be able to learn some significant information about the input, but not enough to find an x' efficiently. For example, a function f might be constructed that mapped all even numbers to another even number and all odd numbers to another odd number. In this case, f could be constructed to be a one-way function even though it reveals the first bit of its input.

Solutions to the encryption problem fundamentally depend on being able to produce output that looks random; think about the requirements we stated above:

• An adversary that sees the CS 513 staff return your homework will not learn anything about your grade.
• An adversary that sees a message you send to the course instructor will not learn what you said.

It is not intuitively clear how to use one-way functions to satisfy these requirements, since one-way functions are allowed to leak some information about their input. The idea behind no-one knowing anything more than the fact that you sent a message to the instructor is that they can't distinguish what you sent from a random message.

This is all fine and well, but what does it mean for something to look random? The intuition behind the formal definition is that a sequence b 1 , b 2 , ..., b n of single bits looks random if it is computationally hard to predict the next value b n+1 in that sequence with probability much better than 1/2. This test is called the Next Bit Test , and it can be shown to be the strongest test for randomness of unbiased sources.

Pseudo-random functions (PRF) take a key and a value as input and output a value that looks random to principals that do not know the key. More formally, it is hard on average to distinguish the output of a pseudo-random function from the output of a random function. To principals that do know the key, the Next Bit Test fails; any principal with the key can, by definition of a PRF, generate the next bit efficiently.

The role of cryptography in information security

Cryptography is an information security tactic used to protect enterprise information and communication from cyber threats through the use of codes. At Triskele Labs, we consider it the art of hiding information to prevent unauthorised access to your data.

This practice refers to secure information and communication techniques derived from mathematical concepts and a set of rule-based calculations, called algorithms, to transform messages in ways that are hard to decipher. 

These algorithms are then used for cryptographic key generation, digital signing, verification to protect data privacy, web browsing on the internet, and confidential communication like credit card transactions and emails.

Cryptography achieves several information security-related objectives including confidentiality, integrity, and authentication, and non-repudiation. In this post, we explore what these reveal about cryptography.

Cryptography protects the confidentiality of information

Confidentiality is a key priority when it comes to cryptography. It means that only people with the right permission can access the information transmitted and that this information is protected from unauthorised access at all stages of its lifecycle.

Confidentiality is necessary for maintaining the privacy of those whose personal information is stored in enterprise systems. Encryption, therefore, is the only way to ensure that your information remains secure while it’s stored and being transmitted.

Even when the transmission or storage medium has been compromised, the encrypted information is practically useless to unauthorised individuals without the right keys for decryption.

It ensures the integrity of your data

In the security environment, integrity refers to the fact that information systems and their data are accurate. 

If a system possesses integrity, it means that the data in the system is moved and processed in predictable ways. Even when the data is processed, it doesn’t change.

Cryptography ensures the integrity of data using hashing algorithms and message digests. By providing codes and digital keys to ensure that what is received is genuine and from the intended sender, the receiver is assured that the data received has not been tampered with during transmission .

It assures that the sender or receiver is the right one

Cryptography also helps you make sure that the identity of both the sender and receiver and the origin or destination of the information is correct—the most important being the latter. 

When the source of information is identified, it’s much easier for your teams to communicate securely.

Authentication is only possible via a special key exchange that’s used by the sender to prove his/her identity. This usually involves a username and a password, but can also include other methods like a smart card, retina scan, voice recognition, or fingerprint scan.

Both sender and receiver are held accountable through non-repudiation

In this context, non-repudiation refers to the confirmation of a transferred message that is either sent or received. This principle ensures that the sender cannot deny the fact that he/she sent the data. It uses digital signatures to prevent the sender from denying the origin of the data.

It is also a way to guarantee that the receiver does not deny having received the message.

Cryptography also ensures the availability of data

Cryptography also supports the availability of data by guaranteeing that individuals with the right permission can use systems and retrieve data in a dependable and timely manner. This ensures that information systems are reliable and accessible.

Uphold information security with powerful cryptography strategies

Information security is one of the biggest concerns for businesses operating competitively in the modern business environment. When executed via the right strategies, cryptography helps you safeguard your intellectual property, preventing it from falling prey to cyber threats and threat actors.

Get in touch with our team at Triskele Labs and discover how we can help you protect your data and integrate cryptography into your security strategies and systems. 

In the meantime, you can also explore other strategies including web application penetration testing , internal network penetration testing , or cybersecurity awareness training and take proactive steps to secure critical enterprise resources.

Latest from the blog

Cryptographic Algorithms: The Use in Cyber Security Essay

• To find inspiration for your paper and overcome writer’s block
• As a source of information (ensure proper referencing)
• As a template for you assignment

Introduction

Symmetric key cryptography strengths, symmetric key cryptography weaknesses, asymmetric key cryptography strengths, asymmetric key cryptography weaknesses, how encryption is used by criminals.

• Cryptography in various forms is one of the most standard and relatively reliable tools utilized in contemporary cyber security.
• Cryptographic protection of a system depends on two factors, 1) the strength of the keys and effectiveness of associated protocols, and 2) protection of said keys via key management (generation, storage, and distribution).
• Therefore, it is important to consider that strong algorithms combined with poor key management is just likely to fail as if there was strong key management with a poor algorithm.
• Three general classes of cryptographic algorithms approved by NIST – hash function, symmetric-key algorithm, and asymmetric-key algorithm (Turner, 2019).
• Each has its trade offs and depends on the security goal being accomplished.
• Algorithm transforms data to be virtually unlockable without a key.
• Designated standard by U.S. government, combined with 256-bit key length, impossible even for a supercomputer to guess the combinations.
• Offers benefit of data confidentiality by using the same key for encryption and decryption.
• Symmetric key encryption is fast and efficient for large data amounts (Shinder & Cross, 2008).
• Can be used in payment applications, such for card transaction, with the PII being protected to prevent identity theft.
• The key has to be shared with the party to whom the data is being relayed, making it vulnerable to intercept by malicious parties.
• Since symmetric key is universal, if a malicious party is able to have access to the key, they can decrypt everything from both sides.
• Every use of the key can leak some information which presents potential opportunity for an attacker to reconstruct it.
• The larger the system gets, the greater the need for a computerized key management system, for example key cards being released in the workplace (Smirnoff & Turner, 2019).
• Also known as public key encryption, asymmetric encryption creates a key pair generated to be used together. A private key is never shared and only used by its owner, and the public key is available to everyone.
• Logically it is mathematically unfeasible to re-create the private key based on the public key.
• If they system is compromised, attackers will only have access to half the data or communications.
• No need for safety of key transmission as the public key cannot be used alone, only the private key associated with that public key can decrypt a received message (Shinder & Cross, 2008).
• Technology used in encryption systems that require key exchange over public network, such as email security or web security.
• Asymmetric cryptography is generally slower than other methods due to the complex mathematical process of using two keys.
• No built-in authentication for public key, still allowing for identity theft or interception of messages.
• Computationally costly compared to counterparts as the keys must be much longer to have same level of security.
• Vulnerable to brute-force attacks (Blumenthal, n.d.).
• Encryption offers security to malicious parties just as it does to organizations or individuals.
• Criminal can encrypt all their incoming and outgoing communications, to the point where they can chat on public forums without anyone being able to decode.
• Transmission of key data in criminal/terrorist attacks with little possibility of being intercepted by law enforcement.
• Hiding criminal identity in communications for ransoms and otherwise (Oksholen, n.d.).
• Countermeasures may include projects such as CT-SNAIR that model criminal networks, physical interception of decryption keys by law enforcement, and counterhacking by cybersecurity experts trying to find vulnerabilities in criminal networks.
• Encryption is a strong protection measure used by organizations.
• Symmetric and asymmetric key cryptography approach encryption differently but each carries certain risks.
• Along with encryption, it is necessary to practice other security measures such as key management.
• Important to realize criminals and attackers may exploit cryptology to provide protection for themselves or deceive themselves.

Blumenthal, M. (n.d.). Encryption: Strengths and weaknesses of public-key cryptography . Web.

Oksholen, T. (n.d.). Encrypted crimes . Sintef. Web.

Shinder, L., & Cross, M. (2008). Scene of the cybercrime (2nd ed.). Syngress.

Smirnoff, P., & Turner, D. M. (2019). Symmetric Key Encryption – why, where and how it’s used in banking. Cryptomathic. Web.

Turner, D. M. (2019). Summary of cryptographic algorithms – according to NIST . Cryptomathic. Web.

• Public Key Infrastructure: Concepts and Applications
• End-to-End Encryption: Hash, Passwords, and Security
• Hashing Algorithms in the Security of Information
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• Facebook Compatibility With Padgett-Beale Cybersecurity Philosophy
• Information Assurance Certifications Briefing
• Cybersecurity Issues in Industrial Critical Infrastructure
• Chicago (A-D)
• Chicago (N-B)

IvyPanda. (2022, November 9). Cryptographic Algorithms: The Use in Cyber Security. https://ivypanda.com/essays/cryptographic-algorithms-the-use-in-cyber-security/

"Cryptographic Algorithms: The Use in Cyber Security." IvyPanda , 9 Nov. 2022, ivypanda.com/essays/cryptographic-algorithms-the-use-in-cyber-security/.

IvyPanda . (2022) 'Cryptographic Algorithms: The Use in Cyber Security'. 9 November.

IvyPanda . 2022. "Cryptographic Algorithms: The Use in Cyber Security." November 9, 2022. https://ivypanda.com/essays/cryptographic-algorithms-the-use-in-cyber-security/.

1. IvyPanda . "Cryptographic Algorithms: The Use in Cyber Security." November 9, 2022. https://ivypanda.com/essays/cryptographic-algorithms-the-use-in-cyber-security/.

Bibliography

IvyPanda . "Cryptographic Algorithms: The Use in Cyber Security." November 9, 2022. https://ivypanda.com/essays/cryptographic-algorithms-the-use-in-cyber-security/.

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1 (page 1) p. 1 Introduction

• Published: May 2002
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The ‘Introduction’ outlines the aims of this VSI, which is to present a non-technical introduction to cryptology — the art and science of code-making and code-breaking — and to show why we all need to understand how it works and what it can achieve. It presents cryptography as an interesting, important topic and it should enable the reader to appreciate the impact cryptography has had on our history and is likely to have on our future. It should also facilitate understanding of the problems that the increased availability of cryptography causes for governments and law enforcement agencies.

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A brief history of cryptography and why it matters

Cryptography has a long history dating back thousands of years. Image:  REUTERS/Mal Langsdon

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Cryptography, cyphers, secret codes. Words that summon up images of a world of covert messages, clandestine meetings and international espionage. Those associations were reinforced recently when Queen Elizabeth II of the UK unveiled a commemorative plaque to mark the centenary of GCHQ – the Government Communications Headquarters in Cheltenham, England.

The plaque unveiled by Her Majesty Queen Elizabeth also contained a secret code of its own , which was made up of a series of dots and dashes under letters and numbers in the plaque’s dedication. Taken together the highlighted characters spell out the message hundred years – not the kind of classified material likely to get any spymasters feeling hot under the collar, nor a level of encryption you’d need a quantum computer to decipher. But a fitting touch to this particular memorial.

GCHQ was formed in the aftermath of World War I. It's where the British military’s signals and intelligence units developed expertise in cracking coded German messages – one of which was the so-called Zimmermann telegram of 1917 . Zimmermann, the then German Foreign Minister, had concocted a plan to keep the US out of the war by provoking disturbances along the Mexican border. This, it was hoped, would distract attention from US merchant ships being sunk in the Atlantic by German submarines.

But by intercepting and decoding the Zimmermann telegram, British intelligence publicized the German plan, which helped turn public opinion in America toward joining the fight.

The wisdom of the ancients

Despite the illustrious 100-year history of GCHQ, the practice of cryptography actually goes back thousands of years. One of the earliest examples dates back to around 200 BCE and was devised by the Greek historian Polybius. In a Polybius square, letters fill out a grid of 25 spaces and each letter is identified by its coordinates in the square. This allows for strings of numbers to be used as encoded messages that will only make sense to someone with a copy of the same Polybius square.

In the example below, a message reading ‘44 23 15 13 11 44 43 11 44 34 33 44 23 15 32 11 44’ would translate as the cat sat on the mat. Whether Polybius was in possession of either cats or mats, however, is unclear.

According to Nicholas McDonald of the Department of Electrical and Computer Engineering at the University of Utah: “The earliest known text containing components of cryptography originates in the Egyptian town Menet Khufu on the tomb of nobleman Khnumhotep II nearly 4,000 years ago.”

The Spartans were also known to have developed a form of cryptography, based on wrapping parchment around a polygonal cylinder and Julius Caesar used a basic cypher to encode his messages – moving along the alphabet by a pre-agreed number of letters. But there’s a lot more to encryption than making it tricky for people to read your messages and despite its interesting historical roots, it is one of the fundamentals of business and personal life here in the 21st century.

Cryptography is at the heart of all secure digital communications – the emails you send, the websites you visit (well, a growing proportion of them) and the apps you use. It allows for data to be scrambled and rendered unreadable by everyone except the intended recipient. Its use can range from your bank card details being sent to a retailer via their online store to messaging apps such as Whatsapp or Telegram. It’s also hugely important to the internet of things (IoT) where data is seamlessly communicated between smart sensors and corporate networks.

Someone’s knocking at the (back) door

It transpired just a few years ago that international terrorist groups and organized criminal gangs were communicating via encrypted messages. This led to calls from politicians in Europe, the US and beyond for government intelligence services to be given the tools to intercept and read those messages. It’s an issue that was thrust centre stage amid one of America’s worst mass shootings of recent years.

On the morning of 2 December 2015, Syed Rizwan Farook and his wife Tashfeen Malik shot and killed 14 people in the Californian city of San Bernardino . Approximately 20 others were injured. The attackers were tracked down later that day and in an ensuing gun battle were both killed. Determined to find answers regarding the killers’ motives, the FBI soon sought help from Apple to unlock an iPhone belonging to Farook. Apple, however, refused to comply.

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Supercomputing could solve the world’s problems, and create many more, fighting cybercrime – what happens to the law when the law cannot be enforced, how to unleash the enormous power of global healthcare data.

A legal row broke out over the obligations, rights and wrongs of tech firms providing a back door to government agencies that would allow them to bypass encryption. The Justice Department described the situation as unfortunate, saying: “Apple continues to refuse to assist the department in obtaining access to the phone of one of the terrorists involved in a major terror attack on US soil.”

It was a view that garnered much support in the public domain but which Apple’s CEO Tim Cook called a “potentially” chilling breach of privacy: “The same engineers who built strong encryption into the iPhone to protect our users would, ironically, be ordered to weaken those protections and make our users less safe.” The problem, as Apple and many others in the tech industry see it, is that providing any kind of back-door access for official use would weaken security.

The end of the (encrypted) world as we know it

The next stage in the development of encryption may involve the use of quantum computers, which will add layers of complexity that are currently not possible. But until quantum cryptography becomes commonplace, there is a fear that this new groundbreaking technology could render current encryption next-to-useless . Attempts to hack encrypted services are thwarted by the use of long, complex prime numbers which can only be determined by the use of cryptography keys.

Encryption effectively shows you the answer to a puzzle or question and will only let you in if you know what the right question is. So, if the answer is 18, the question might be 3x6 or 2x9. But when the answer you’re dealing with is a very long prime number and the calculations are a complex sequence of multiplication, division and subtraction, a simple guess will never crack the code. A series of guesses, using a computer, could take hundreds of years. But a quantum computer could, theoretically, run through all the possible permutations of your encryption keys simultaneously.

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The History of Cryptography

• by history tools
• March 26, 2024

The Secret History of Codes and Ciphers: A Technical Evolution

For over 4,000 years, cryptography has enabled secret communication between allies and hidden information from enemies. Behind the outcomes of wars, scandals, and politics, cryptographers have shaped history through concealment and revelation of critical information. Cryptography has directly supported the rise and fall of empires, protected intelligence gathering, and now secures our digital infrastructure against threats from fraud to cyber warfare.

Understanding cryptography’s pivotal history provides critical context for why encryption remains one of the most important technologies safeguarding our data. As individuals and organizations rely ever more on digital connectivity, they depend on cryptography as a first line of defense against risks ranging from hackers to state surveillance. Developing strong cryptography and using techniques properly requires grasping the technical foundations built up over history.

Defining Cryptography and Its Early Development

At an elementary level, cryptography refers to techniques for securing communication and information. Typically this involves encrypting (enciphering) data using an algorithm and a secret value – the “key” needed to make sense of the resulting ciphertext. Decryption (deciphering) makes the data readable again to anyone who possesses the key.

The origins of these concepts date back millennia. Circa 1900 BC, ancient Egypt saw the first records of symbolic hieroglyphs suggesting extra meaning beyond visual symbols. Later, around 400 BC, the Kama Sutra noted a simple cipher replacing letters, based on whether they fell in the first or second half of the Sanskrit alphabet.

Simple ciphers replace parts of a message in a consistent but secret way known only to the recipient. This could involve shifting letters by a set number of places as Julius Caesar famously did:

The Spartans used more complex schemes on leather strips wrapped around staffs. By 600 AD, religious orders and medieval guilds applied cryptography to protect ritual knowledge and business secrets.

Cryptography started an ongoing battle between codemakers developing new techniques and codebreakers attacking those methods. Around this time Islamic scholars like Al-Kindi wrote extensive research on deciphering codes, founding cryptanalysis techniques still relevant today like frequency analysis.

The Renaissance Sparks an Acceleration

By the Renaissance, cryptography was integral to diplomacy, politics and trade. Having become essential to the era’s powerful institutions, the pace of advances accelerated across Europe and Asia:

New encryption methods tried to stay ahead of cryptanalysts. Alberti’s polyalphabetic ciphers frustrated codebreakers by using multiple cipher alphabets in one message, making frequency analysis less effective. One-time pads took this further by using a random key as long as the message itself, making messages provably secure.

Mechanical devices also emerged, preparing for large-scale encryption. Rossignol’s primitive cipher machine automated letter substitutions. More sophisticated descendants would arise over the next centuries, culminating in devices that fundamentally reshaped 20th century cryptography.

Spycraft in the Revolutionary Era

By the 1700s, nations deeply relied on cryptography for politics and wartime communications. Spy networks like Britain’s “Secret Service Bureau” intercepted and analyzed encrypted documents, pivotal in international relations. Coded communications helped coordinate uprisings too – American revolutionaries and French rebels used ciphers for secret correspondence plotting activities.

Notably, cryptography accelerated in wartime as both sides invested in codemaking and codebreaking. The Union’s advantage here was significant; it devoted 30% of its wartime budget to telegraph communications and cryptography, helping monitor Confederate movements.

Machines Emerging in the World Wars

Cryptography further mechanized leading up to and through the world wars. Key developments included:

• 1854 : Charles Wheatstone invents an electromechanical cipher device, building towards more complex encryption machines.
• Early 1900s : Gilbert Vernam and Major Joseph Mauborgne develop the one-time pad cipher into a workable system.
• 1918 : Arthur Scherbius patents the Enigma rotor cipher machine, which would become central in WW2 cryptography.

The 720 million possible settings made Enigma messages notoriously hard to crack. Nonetheless, codebreakers on the Western front slowly unraveled Enigma communications through capturing settings sheets and exploiting weaknesses with how the machine was used. Their successes extracting key intelligence from encrypted communications proved decisive across campaigns in Europe and the Pacific.

Statistics on Use of Encryption in Digital Age

The Evolution of Modern Cryptography

Enigma represented an apex of mechanical cryptography. Thereafter cryptography rapidly dematerialized into mathematical algorithms and digital implementations as computing advanced. After WWII, two Bell Labs researchers, Claude Shannon and Bob Noyce laid crucial foundations here.

In 1949 Shannon wrote a groundbreaking paper formalizing cryptography mathematically, pioneering modern encryption. In 1970 Noyce’s invention of the integrated circuit fueled computers processing powers to implement sophisticated cryptography. As computers entered everyday life in the 1980s, commercial cryptography emerged driven by public key encryption for securing digital finance transactions and communications.

By the 21st century cryptography has disseminated across our online lives. Encryption secures over 80% of web traffic across HTTPS websites. Messaging apps apply end-to-end encryption for billions of phones and computers. File encryption protects devices or backups against data theft. Behind everyday websites, banks and emails, cryptography secures the modern economy, from credit card transactions to stock trading platforms.

At the same time cyberattacks threaten individuals, corporations and governments daily. Expanding digital connectivity depends on cryptography advancing with sophistication to analyze new attack vectors and apply robust encryption. As quantum computing promises immense power to one day crack modern algorithms, cryptographers already study new paradigms like lattice and multivariate cryptography to maintain encryption strength for decades ahead.

Conclusion: A Vital History for Digital Security

For over 4 millennia, cryptography has influenced the course of human history while adapting across eras from ancient civilizations to the ongoing digital revolution. Cryptography has been integral not only to the biggest political scandals and military victories, but also enabling the enormous social transformations and economic growth driven by internet adoption over recent decades.

As today’s digital infrastructures underpin communication, finance, energy and transportation systems worldwide, cryptography remains pivotal securing these foundations against catastrophe failure or adversary control. Much as nuclear weapons specialists argued you cannot disinvent the atomic bomb, uninventing cryptographically secure communications now seems impossible – we must perpetually advance its strengths against inevitable threats emerging in any era.

Understanding cryptography’s rich technical and social history provides important context for why the subject commands such vital importance. Solving the next generation of digital security challenges to sustain civilization’s accelerating technological dependence cannot ignore lessons cryptographers have learned over 4,000 years developing secret writing with adversaries always advancing in parallel. Cryptography’s pivotal past presages its indispensable role securing civilization’s future.

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Schneier on Security

Home Essays

Why Cryptography Is Harder Than It Looks

• Bruce Schneier
• Information Security Bulletin

From e-mail to cellular communications, from secure Web access to digital cash, cryptography is an essential part of today’s information systems. Cryptography helps provide accountability, fairness, accuracy, and confidentiality. It can prevent fraud in electronic commerce and assure the validity of financial transactions. It can prove your identity or protect your anonymity. It can keep vandals from altering your Web page and prevent industrial competitors from reading your confidential documents. And in the future, as commerce and communications continue to move to computer networks, cryptography will become more and more vital.

But the cryptography now on the market doesn’t provide the level of security it advertises. Most systems are not designed and implemented in concert with cryptographers, but by engineers who thought of cryptography as just another component. It’s not. You can’t make systems secure by tacking on cryptography as an afterthought. You have to know what you are doing every step of the way, from conception through installation.

Billions of dollars are spent on computer security, and most of it is wasted on insecure products. After all, weak cryptography looks the same on the shelf as strong cryptography. Two e-mail encryption products may have almost the same user interface, yet one is secure while the other permits eavesdropping. A comparison chart may suggest that two programs have similar features, although one has gaping security holes that the other doesn’t. An experienced cryptographer can tell the difference. So can a thief.

Present-day computer security is a house of cards; it may stand for now, but it can’t last. Many insecure products have not yet been broken because they are still in their infancy. But when these products are widely used, they will become tempting targets for criminals. The press will publicize the attacks, undermining public confidence in these systems. Ultimately, products will win or lose in the marketplace depending on the strength of their security.

Threats to computer systems

Every form of commerce ever invented has been subject to fraud, from rigged scales in a farmers’ market to counterfeit currency to phony invoices. Electronic commerce schemes will also face fraud, through forgery, misrepresentation, denial of service, and cheating. In fact, computerization makes the risks even greater, by allowing attacks that are impossible against non-automated systems. A thief can make a living skimming a penny from every Visa cardholder. You can’t walk the streets wearing a mask of someone else’s face, but in the digital world it is easy to impersonate others. Only strong cryptography can protect against these attacks.

Privacy violations are another threat. Some attacks on privacy are targeted: a member of the press tries to read a public figure’s e-mail, or a company tries to intercept a competitor’s communications. Others are broad data-harvesting attacks, searching a sea of data for interesting information: a list of rich widows, AZT users, or people who view a particular Web page.

Criminal attacks are often opportunistic, and often all a system has to be is more secure than the next system. But there are other threats. Some attackers are motivated by publicity; they usually have significant resources via their research institution or corporation and large amounts of time, but few financial resources. Lawyers sometimes need a system attacked, in order to prove their client’s innocence. Lawyers can collect details on the system through the discovery process, and then use considerable financial resources to hire experts and buy equipment. And they don’t have to defeat the security of a system completely, just enough to convince a jury that the security is flawed.

Electronic vandalism is an increasingly serious problem. Computer vandals have already graffitied the CIA’s web page, mail-bombed Internet providers, and canceled thousands of newsgroup messages. And of course, vandals and thieves routinely break into networked computer systems. When security safeguards aren’t adequate, trespassers run little risk of getting caught.

Attackers don’t follow rules; they cheat. They can attack a system using techniques the designers never thought of. Art thieves have burgled homes by cutting through the walls with a chain saw. Home security systems, no matter how expensive and sophisticated, won’t stand a chance against this attack. Computer thieves come through the walls too. They steal technical data, bribe insiders, modify software, and collude. They take advantage of technologies newer than the system, and even invent new mathematics to attack the system with.

The odds favor the attacker. Bad guys have more to gain by examining a system than good guys. Defenders have to protect against every possible vulnerability, but an attacker only has to find one security flaw to compromise the whole system.

What cryptography can and can’t do

No one can guarantee 100% security. But we can work toward 100% risk acceptance. Fraud exists in current commerce systems: cash can be counterfeited, checks altered, credit card numbers stolen. Yet these systems are still successful because the benefits and conveniences outweigh the losses. Privacy systems—wall safes, door locks, curtains—are not perfect, but they’re often good enough. A good cryptographic system strikes a balance between what is possible and what is acceptable.

Strong cryptography can withstand targeted attacks up to a point—the point at which it becomes easier to get the information some other way. A computer encryption program, no matter how good, will not prevent an attacker from going through someone’s garbage. But it can prevent data-harvesting attacks absolutely; no attacker can go through enough trash to find every AZT user in the country. And it can protect communications against non-invasive attacks: it’s one thing to tap a phone line from the safety of the telephone central office, but quite another to break into someone’s house to install a bug.

The good news about cryptography is that we already have the algorithms and protocols we need to secure our systems. The bad news is that that was the easy part; implementing the protocols successfully requires considerable expertise. The areas of security that interact with people—key management, human/computer interface security, access control—often defy analysis. And the disciplines of public-key infrastructure, software security, computer security, network security, and tamper-resistant hardware design are very poorly understood.

Companies often get the easy part wrong, and implement insecure algorithms and protocols. But even so, practical cryptography is rarely broken through the mathematics; other parts of systems are much easier to break. The best protocol ever invented can fall to an easy attack if no one pays attention to the more complex and subtle implementation issues. Netscape’s security fell to a bug in the random-number generator. Flaws can be anywhere: the threat model, the system design, the software or hardware implementation, the system management. Security is a chain, and a single weak link can break the entire system. Fatal bugs may be far removed from the security portion of the software; a design decision that has nothing to do with security can nonetheless create a security flaw.

Once you find a security flaw, you can fix it. But finding the flaws in a product can be incredibly difficult. Security is different from any other design requirement, because functionality does not equal quality. If a word processor prints successfully, you know that the print function works. Security is different; just because a safe recognizes the correct combination does not mean that its contents are secure from a safecracker. No amount of general beta testing will reveal a security flaw, and there’s no test possible that can prove the absence of flaws.

Threat models

A good design starts with a threat model: what the system is designed to protect, from whom, and for how long. The threat model must take the entire system into account—not just the data to be protected, but the people who will use the system and how they will use it. What motivates the attackers? Must attacks be prevented, or can they just be detected? If the worst happens and one of the fundamental security assumptions of a system is broken, what kind of disaster recovery is possible? The answers to these questions can’t be standardized; they’re different for every system. Too often, designers don’t take the time to build accurate threat models or analyze the real risks.

Threat models allow both product designers and consumers to determine what security measures they need. Does it makes sense to encrypt your hard drive if you don’t put your files in a safe? How can someone inside the company defraud the commerce system? Are the audit logs good enough to convince a court of law? You can’t design a secure system unless you understand what it has to be secure against.

System design

Design work is the mainstay of the science of cryptography, and it is very specialized. Cryptography blends several areas of mathematics: number theory, complexity theory, information theory, probability theory, abstract algebra, and formal analysis, among others. Few can do the science properly, and a little knowledge is a dangerous thing: inexperienced cryptographers almost always design flawed systems. Good cryptographers know that nothing substitutes for extensive peer review and years of analysis. Quality systems use published and well-understood algorithms and protocols; using unpublished or unproven elements in a design is risky at best.

Cryptographic system design is also an art. A designer must strike a balance between security and accessibility, anonymity and accountability, privacy and availability. Science alone cannot prove security; only experience, and the intuition born of experience, can help the cryptographer design secure systems and find flaws in existing designs.

Implementation

There is an enormous difference between a mathematical algorithm and its concrete implementation in hardware or software. Cryptographic system designs are fragile. Just because a protocol is logically secure doesn’t mean it will stay secure when a designer starts defining message structures and passing bits around. Close isn’t close enough; these systems must be implemented exactly, perfectly, or they will fail. A poorly designed user interface can make a hard-drive encryption program completely insecure. A false reliance on tamper-resistant hardware can render an electronic commerce system all but useless. Since these mistakes aren’t apparent in testing, they end up in finished products. Many flaws in implementation cannot be studied in the scientific literature because they are not technically interesting. That’s why they crop up in product after product. Under pressure from budgets and deadlines, implementers use bad random-number generators, don’t check properly for error conditions, and leave secret information in swap files. The only way to learn how to prevent these flaws is to make and break systems, again and again.

Cryptography for people

In the end, many security systems are broken by the people who use them. Most fraud against commerce systems is perpetrated by insiders. Honest users cause problems because they usually don’t care about security. They want simplicity, convenience, and compatibility with existing (insecure) systems. They choose bad passwords, write them down, give friends and relatives their private keys, leave computers logged in, and so on. It’s hard to sell door locks to people who don’t want to be bothered with keys. A well-designed system must take people into account.

Often the hardest part of cryptography is getting people to use it. It’s hard to convince consumers that their financial privacy is important when they are willing to leave a detailed purchase record in exchange for one thousandth of a free trip to Hawaii. It’s hard to build a system that provides strong authentication on top of systems that can be penetrated by knowing someone’s mother’s maiden name. Security is routinely bypassed by store clerks, senior executives, and anyone else who just needs to get the job done. Only when cryptography is designed with careful consideration of users’ needs, and then smoothly integrated, can it protect their systems, resources, and data.

The state of security

Right now, users have no good way of comparing secure systems. Computer magazines compare security products by listing their features, not by evaluating their security. Marketing literature makes claims that are just not true; a competing product that is more secure and more expensive will only fare worse in the market. People rely on the government to look out for their safety and security in areas where they lack the knowledge to make evaluations—food packaging, aviation, medicine. But for cryptography, the U.S. government is doing just the opposite.

When an airplane crashes, there are inquiries, analyses, and reports. Information is widely disseminated, and everyone learns from the failure. You can read a complete record of airline accidents from the beginning of commercial aviation. When a bank’s electronic commerce system is breached and defrauded, it’s usually covered up. If it does make the newspapers, details are omitted. No one analyzes the attack; no one learns from the mistake. The bank tries to patch things in secret, hoping that the public won’t lose confidence in a system that deserves no confidence. In the long run, secrecy paves the way for more serious breaches.

Laws are no substitute for engineering. The U.S. cellular phone industry has lobbied for protective laws, instead of spending the money to fix what should have been designed correctly the first time. It’s no longer good enough to install security patches in response to attacks. Computer systems move too quickly; a security flaw can be described on the Internet and exploited by thousands. Today’s systems must anticipate future attacks. Any comprehensive system—whether for authenticated communications, secure data storage, or electronic commerce—is likely to remain in use for five years or more. It must be able to withstand the future: smarter attackers, more computational power, and greater incentives to subvert a widespread system. There won’t be time to upgrade them in the field.

History has taught us: never underestimate the amount of money, time, and effort someone will expend to thwart a security system. It’s always better to assume the worst. Assume your adversaries are better than they are. Assume science and technology will soon be able to do things they cannot yet. Give yourself a margin for error. Give yourself more security than you need today. When the unexpected happens, you’ll be glad you did.

Categories: Computer and Information Security

Tags: Information Security Bulletin

Sidebar photo of Bruce Schneier by Joe MacInnis.

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All you need to know about Cryptography

Checked : T. M. H. , Greg B.

Latest Update 19 Jan, 2024

Table of content

The meaning of cryptography

What is a cryptographic system, and how does it work, two types of encryption, symmetric cryptography: some examples, asymmetric cryptographic algorithms, data encryption, hash algorithm, and verification of message integrity, lattice-based and quantum cryptography.

Cryptography is a fundamental tool in the fight against cybercrime.

What is encryption, and what does it mean? The etymology helps to understand: Kryptós (hidden) and graphía (writing) are the two Greek words that make up the term cryptography. The latter is nothing but a system designed to make a message unreadable for those who do not have the solution to decode it. Which cryptography system is used in computer science? Here’s all you need you to know about cryptography. Read on!

Today communication - of any kind - has acquired an increasingly central role in the life of each of us; in the internet age, billions of information (even sensitive) is circulating on the network. That's why it has become even more necessary to develop sophisticated systems capable of guaranteeing a high level of privacy of some of these data.

Therefore, computer coding, as we know it today, is a continually evolving subject. And precisely because of its continuous evolution, experts never advise against relying on the latest cryptographic algorithm released: paradoxically. It is guaranteed by systems that are already known and publicly tested (a feature that obviously cannot be guaranteed in the case of newer algorithms).

Cryptography can be defined as a system that through the use of a mathematical algorithm, acts on a sequence of characters, transforming it. This transformation is based on the value of a secret key, i.e., the parameter of the encryption/decryption algorithm. Precisely the secrecy of this key represents the security key of every cryptographic system.

Based on the kind of key used, this computer cryptography system can be divided into two types: symmetric and asymmetric encryption. When a single key is present, we can say it as symmetric key or secret key cryptography (the sender's and recipient's keys are the same). When instead there are two distinct encryption keys, we can say it as asymmetric or public-key cryptography (the encryption key is public, while the decryption key is private).

The symmetric cryptography, therefore, foresees the use of a single key both to hide the message and to unlock it and is relatively fast and simple to implement compared to other types of encryption (such as the asymmetric one).

The most common algorithm used today in symmetric key cryptography is called Advanced Encryption Standard (AES). The two Belgian cryptographers, Joan Daemen and Vincent Rijmen developed the Advanced Encryption Standard at the request of the National Institute of Standards and Technology in the late 90s. It became a public standard at the end of 2001.

AES is based on various operations performed on 16-byte data blocks, repeated several times, called rounds, and consists of three 128-bit block ciphers (precisely divided into 4 × 4 8-bit sub-blocks).

In 2003 the US National Security Agency approved the 128-bit AES to protect all government information classified as secret and AES at 192 and 256 bits for so-called top-secret documents. The main disadvantage of symmetric key cryptography is it involved must exchange the key This need to distribute and manage a large number of keys in a secure manner, for most cryptographic services implies the need to make use of other types of encryption algorithms.

Asymmetric algorithms use two interdependent keys, one to encrypt the data, and the other to decode them i.e. one private and one public. If one key is used for the encryption operation, the other must be used for decryption and vice versa. The private key is known only by the owner; it must be kept secret and must not be shared with anyone else, while all correspondents share the public one.

Being aware of the public key does not allow us to trace the private key in any way. RSA is much slower than symmetric encryption, data is generally encrypted with a symmetric algorithm, and then the relatively short symmetric key is encrypted using RSA. It allows you to securely send other parties the key needed to decode the data, along with symmetrically encrypted data.

The cryptographic hash function transforms a certain   amount of data , such as a file or a message of variable length, in a short fixed string (called hash value or message digest. This data encryption system is mainly used to verify the integrity of a message or to check that the data in question has not changed.

In fact, any accidental or intentional changes to the data will change the value of the hash. A good hash is unidirectional and must, therefore, be extremely difficult to invert (thus not allowing going back to the original value). MD5 and SHA-1 have long been the most widely used hash algorithms, but are now considered weak and are replaced by SHA-2 (which includes SHA-224, SHA-256, SHA-384 or SHA-512).

They are algorithmically similar to SHA-1, and so, according to experts, a new hash standard, SHA-3, will be selected in the coming years.

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The encryption on lattices based (latex-based) uses two-dimensional algebraic constructs known, precisely as "lattices," resistant to quantum computation schemes.

The lattice-based primitives have already been inserted correctly in cryptographic protocols such as TLS and Internet Key Exchange, and potentially, all the most widespread security protocols can be made secure by replacing algorithms vulnerable to those of this nature.

Lattice-based encryption is also the basis for another encryption technology called Fully Homomorphic Encryption or FHE. It can allow you to perform file calculations without having to decrypt them by operating two encrypted data we obtain an encrypted result. It once deciphered, is equal to the effect that would be obtained by performing the same process on the two unencrypted data.

The quantum cryptography is based on an approach that uses properties of quantum mechanics when the key is exchanged so that it cannot be intercepted without the sender and receiver noticing. In fact, we talk about the quantum distribution of keys, which is a transmission that can boast a condition of secrecy that is perfect from a mathematical point of view.

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What Is Cryptocurrency?

Understanding cryptocurrency, how to buy cryptocurrency, is cryptocurrency legal.

• Cryptocurrency Safety
• Advantages and Disadvantages

The Bottom Line

• Cryptocurrency

Cryptocurrency Explained With Pros and Cons for Investment

Learn what you need to know before you invest in a virtual currency

A cryptocurrency is a digital or virtual currency secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Most cryptocurrencies exist on decentralized networks using blockchain technology—a distributed ledger enforced by a disparate network of computers.

A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.

Key Takeaways

• A cryptocurrency is a form of digital asset based on a network that is distributed across a large number of computers. This decentralized structure allows them to exist outside the control of governments and central authorities.
• Some experts believe blockchain and related technologies will disrupt many industries, including finance and law.
• The advantages of cryptocurrencies include cheaper and faster money transfers and decentralized systems that do not collapse at a single point of failure.
• The disadvantages of cryptocurrencies include their price volatility, high energy consumption for mining activities, and use in criminal activities.

Investopedia / Tara Anand

Cryptocurrencies are digital or virtual currencies underpinned by cryptographic systems. They enable secure online payments without the use of third-party intermediaries. "Crypto" refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions.

Central to the appeal and functionality of Bitcoin and other cryptocurrencies is blockchain technology. As its name indicates, a blockchain is essentially a set of connected blocks of information on an online ledger. Each block contains a set of transactions that have been independently verified by each validator on a network.

Every new block generated must be verified before being confirmed, making it almost impossible to forge transaction histories. The contents of the online ledger must be agreed upon by a network of individual nodes, or computers that maintain the ledger.

Experts say that blockchain technology can serve multiple industries, supply chains, and processes such as online voting and crowdfunding. Financial institutions such as JPMorgan Chase & Co. ( JPM ) are using blockchain technology to lower transaction costs by streamlining payment processing.

Types of Cryptocurrency

Many cryptocurrencies were created to facilitate work done on the blockchain they are built on. For example, Ethereum's ether was designed to be used as payment for validating transactions and opening blocks. When the blockchain transitioned to proof-of-stake in September 2022, ether (ETH) inherited an additional duty as the blockchain's staking mechanism. Ripple's XRP is designed to be used by banks to facilitate transfers between different geographies.

Because there are so many cryptocurrencies on the market, it's important to understand the types of cryptocurrencies. Knowing whether the coin you're looking at has a purpose can help you decide whether it is worth investing in —a cryptocurrency with a purpose is likely to be less risky than one that doesn't have a use.

Most of the time, when you hear about cryptocurrency types, you hear the coin's name. However, coin names differ from coin types. Here are some of the types you'll find with some of the names of tokens in that category:

• Utility : XRP and ETH are two examples of utility tokens. They serve specific functions on their respective blockchains.
• Transactional : Tokens designed to be used as a payment method. Bitcoin is the most well-known of these.
• Governance : These tokens represent voting or other rights on a blockchain, such as Uniswap.
• Platform : These tokens support applications built to use a blockchain, such as Solana.
• Security tokens : Tokens representing ownership of an asset, such as a stock that has been tokenized (value transferred to the blockchain). MS Token is an example of a securitized token. If you can find one of these for sale, you can gain partial ownership of the Millenium Sapphire.

If you find a cryptocurrency that doesn't fall into one of these categories, you've found a new category or something that needs to be investigated to be sure it's legitimate.

If you want to use cryptocurrency to buy products and services, you will need to go to a cryptocurrency exchange . These are businesses that allow you to buy or sell cryptocurrencies from other users at the current market price, similar to a stock. After buying the coins, you will need to transfer them to a digital wallet or use a third-party service like Coinbase to store your coins.

If you only want to buy cryptocurrency as an investment, you may be able to do so through your brokerage. For example, Robinhood allows users to invest in bitcoin and other cryptocurrencies, although you cannot withdraw them from the platform for purchases. In addition, there are several crypto ETFs that provide exposure to the crypto asset class without requiring the investors to maintain their own wallets. For instance, as of May 2024, investors may choose to hold Bitcoin futures ETF shares. The SEC has also approved the listing and trading of Ether spot shares.

Fiat currencies derive their authority from the government or monetary authorities. For example, each dollar bill is backstopped by the U. S. government.

But cryptocurrencies are not backed by any public or private entities. Therefore, it has been difficult to make a case for their legal status in different financial jurisdictions throughout the world. It doesn't help matters that cryptocurrencies have primarily functioned outside most existing financial infrastructure.

In the U.S.

The legal status of cryptocurrencies creates implications for their use in daily transactions and trading. In June 2019, the Financial Action Task Force (FATF) recommended that wire transfers of cryptocurrencies should be subject to the requirements of its Travel Rule, which requires AML compliance.

Although cryptocurrencies are considered a form of money, the Internal Revenue Service (IRS) treats them as financial assets or property for tax purposes. And, as with most other investments, if you reap capital gains selling or trading cryptocurrencies, the government wants a piece of the profits. How exactly the IRS taxes digital assets—either as capital gains or ordinary income—depends on how long the taxpayer held the cryptocurrency and how they used it.

In the United States in July 2023, courts ruled that cryptocurrencies are considered securities when purchased by institutional buyers but not by retail investors purchased on exchanges.

Enthusiasts called it a victory for crypto; however, crypto exchanges are regulated by the SEC, as are coin offerings or sales to institutional investors. So, crypto is legal in the U.S., but regulatory agencies are slowly gaining ground in the industry.

El Salvador is the only country to accept Bitcoin as legal tender for monetary transactions as of August 2023. In the rest of the world, cryptocurrency regulation varies by jurisdiction.

Japan's Payment Services Act defines Bitcoin as legal property. Cryptocurrency exchanges operating in the country are required to collect information about the customer and details relating to the wire transfer.

China has banned cryptocurrency exchanges , transactions, and mining within its borders, but has a Central Bank Digital Currency (CBDC) .

India was reported to be formulating a framework for cryptocurrencies, but until it is enacted, crypto is not yet illegal. Exchanges are free to offer cryptocurrencies.

Cryptocurrencies are legal in the European Union. Derivatives and other products that use cryptocurrencies must qualify as "financial instruments." In June 2023, the European Commission's Markets in Crypto-Assets (MiCA) regulation went into effect. This law sets safeguards and establishes rules for companies or vendors providing financial services using cryptocurrencies.

Is Cryptocurrency a Safe Investment?

Cryptocurrencies have attracted a reputation as unstable investments due to high investor losses due to scams, hacks, bugs, and volatility. Although the underlying cryptography and blockchain are generally secure, the technical complexity of using and storing crypto assets can be a significant hazard to new users.

In addition to the market risks associated with speculative assets, cryptocurrency investors should be aware of the following risks:

• User risk : Unlike traditional finance, there is no way to reverse or cancel a cryptocurrency transaction after it has already been sent. By some estimates, about one-fifth of all bitcoins are now inaccessible due to lost passwords or incorrect sending addresses.
• Regulatory risks : The regulatory status of some cryptocurrencies is still unclear, with many governments seeking to regulate them as securities, currencies, or both. A sudden regulatory crackdown could make it challenging to sell cryptocurrencies or cause a market-wide price drop.
• Counterparty risks : Many investors and merchants rely on exchanges or other custodians to store their cryptocurrency. Theft or loss by one of these third parties could result in losing one's entire investment.
• Management risks : Due to the lack of coherent regulations, there are few protections against deceptive or unethical management practices. Many investors have lost large sums to management teams that failed to deliver a product.
• Programming risks : Many investment and lending platforms use automated smart contracts to control the movement of user deposits. An investor using one of these platforms assumes the risk that a bug or exploit in these programs could cause them to lose their investment.
• Market Manipulation : Market manipulation remains a substantial problem in cryptocurrency, with influential people, organizations, and exchanges acting unethically.

Despite these risks, cryptocurrencies have seen a significant price leap, with the total market capitalization rising to about $1.2 trillion. Despite the asset's speculative nature, some have created substantial fortunes by taking on the risk of investing in early-stage cryptocurrencies.

Advantages and Disadvantages of Cryptocurrency

Cryptocurrencies were introduced with the intent to revolutionize financial infrastructure. As with every revolution, however, there are tradeoffs involved. At the current stage of development for cryptocurrencies, there are many differences between the theoretical ideal of a decentralized system with cryptocurrencies and its practical implementation.

Removes single points of failure

Easier to transfer funds between parties

Removes third parties

Can be used to generate returns

Remittances are streamlined

Transactions are pseudonymous

Pseudonymity allows for criminal uses

Have become highly centralized

Expensive to participate in a network and earn

Off-chain security issues

Prices are very volatile

Advantages Explained

Cryptocurrencies represent a new, decentralized paradigm for money . In this system, centralized intermediaries, such as banks and monetary institutions, are not necessary to enforce trust and police transactions between two parties. Thus, a system with cryptocurrencies eliminates the possibility of a single point of failure—such as a large financial institution setting off a cascade of global crises, such as the one triggered in 2008 by the failure of large investment banks in the U.S.

Cryptocurrencies promise to make transferring funds directly between two parties easier without needing a trusted third party like a bank or a credit card company. Such decentralized transfers are secured by the use of public keys and private keys and different forms of incentive systems, such as proof of work or proof of stake .

Because they do not use third-party intermediaries, cryptocurrency transfers between two transacting parties can be faster than standard money transfers. Flash loans in decentralized finance are an excellent example of such decentralized transfers. These loans, which are processed without backing collateral, can be executed within seconds and are used in trading.

The remittance economy is testing one of cryptocurrency's most prominent use cases. Cryptocurrencies such as Bitcoin serve as intermediate currencies to streamline money transfers across borders. Thus, a fiat currency is converted to Bitcoin (or another cryptocurrency), transferred across borders, and subsequently converted to the destination fiat currency without third-party involvement.

Disadvantages Explained

Though they claim to be an anonymous form of transaction , cryptocurrencies are pseudonymous. They leave a digital trail that agencies like the Federal Bureau of Investigation (FBI) can follow. This opens up the possibility for governments, authorities, and others to track financial transactions.

Cryptocurrencies have become a popular tool with criminals for nefarious activities such as money laundering and illicit purchases. The case of Dread Pirate Roberts , who ran a marketplace to sell drugs on the dark web, is already well known. Cryptocurrencies have also become a favorite of hackers who use them for ransomware activities.

In theory, cryptocurrencies are meant to be decentralized, their wealth distributed between many parties on a blockchain. However, at times, ownership is highly concentrated. As of May 2024, just four addresses owned over 3.5% of all Bitcoin.

One of the conceits of cryptocurrencies is that anyone can mine them using a computer with an Internet connection. However, mining popular cryptocurrencies require considerable energy, sometimes as much energy as entire countries consume. The expensive energy costs and the unpredictability of mining have concentrated mining among large firms whose revenues run into billions of dollars.

Only 98 (2%) of the 4,882 Bitcoin blocks opened from Dec. 29, 2022 to Jan. 29, 2023 were opened by unknown addresses. The other 98% were opened by mining pools.

Though cryptocurrency blockchains are highly secure, off-chain crypto-related key storage repositories, such as exchanges and wallets, can be hacked. Many cryptocurrency exchanges and wallets have been hacked over the years, sometimes resulting in the theft of millions of dollars in coins.

Cryptocurrencies traded in public markets suffer from price volatility, so investments require accurate price monitoring . For example, Bitcoin has experienced rapid surges and crashes in its value, climbing to nearly $65,000 in November 2021 before dropping to just over $20,000 a year and a half later. As a result, many people consider cryptocurrencies to be a speculative bubble , though Bitcoin prices had came roaring back as of May 2024.

How Do You Buy Cryptocurrency?

You can purchase cryptocurrency from popular crypto exchanges such as Coinbase, apps such as Cash App, or through brokers. Another popular way to invest in cryptocurrencies is through financial derivatives, such as CME's Bitcoin futures, or other instruments, such as Bitcoin trusts and ETFs.

What Is the Point of Cryptocurrency?

Cryptocurrencies are a new paradigm for money. They promise to streamline existing financial architecture to make it faster and cheaper. In addition, their technology and architecture decentralize existing monetary systems and make it possible for transacting parties to exchange value and money independently of intermediary institutions such as banks.

What Is the Most Popular Cryptocurrency?

Bitcoin is the most popular cryptocurrency, followed by other cryptocurrencies such as Ethereum, Binance Coin, Solana, and Cardano.

Cryptocurrencies are digital assets that are secured by cryptography. As a relatively new technology, they are highly speculative, and it is important to understand the risks involved before investing.

The comments, opinions, and analyses expressed on Investopedia are for informational purposes online. Read our  warranty and liability disclaimer  for more info. As of the date this article was written, the author does not own cryptocurrency.

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