Crypto Beginner

What is cryptography, and what are the types of algorithms in crypto?

What is cryptography

Key Takeaways

  • Cryptography is the study and use of techniques that enable the secure transfer of information.
  • It helps maintain confidentiality, integrity, and authenticity.
  • Cryptos use public key cryptography algorithms that involve public and private keys to encrypt and decrypt messages.

Many people find the world of crypto complex and scary, and that has a lot to do with how much jargon there is in the space. But regular folks like us shouldn’t have to give up on investment options simply because we are put off by the jargon. Besides, so many people going “the grapes are sour” is no good for the crypto industry either. That’s why we are here to break it all down for you, one topic at a time. Today, we take on cryptography.

Understanding a topic like this will help you understand how secure crypto projects really are. This is where you learn how cryptographic techniques work and what are the different types.

What is cryptography?

The word “cryptography” is divided into two parts. “Crypt” means hidden, and “graphy” means in writing. Cryptography, in layperson terms, is thus the study of hidden meaning in writing.

In today’s world of modern finance, though, cryptography refers to something more specific than that. It is the use and study of techniques that enable us to secure information and communication but it usually involves coding.

The practice of these techniques ensures that the message or information can only be accessed by intended recipients. In other words, it prevents unauthorized access. It is used in cryptographic key generation, digital signing, and verification. To sum it up, the goal is to protect data privacy and ensure confidentiality in communication.

In modern finance, the techniques of cryptography are derived from mathematical concepts and rule-based calculations called algorithms. These cryptographic algorithms ensure, to a large extent, that nobody except the intended recipient can decode the message being transmitted.

How do cryptographic algorithms work?

This type of algorithm uses a mathematical function for encryption and decryption. The algorithm works in combination with a key—which may be a word, a number, a phrase, or some combination of these elements—to encrypt the plaintext message. The same message will encrypt to a different algorithm with a different key. The main strength of using a cryptographic algorithm and secret key is that it offers a boost to security.

A cryptographic algorithm is a key part of the crypto ecosystem. Since security is essential for crypto to survive, developers employ all possible keys and protocols to secure their projects.

Types of cryptographic algorithms

There are multiple types of cryptographic algorithms. In this section, we focus on the three most important ones.

1. Conventional encryption

Also known as secret-key or symmetric-key encryption, this type of algorithm uses a single key for encryption and decryption. It’s something like a lock and key mechanism.

In this type, the sender encrypts a plaintext message using the cryptographic algorithm and a secret key. Then the sender shares the key with the receiver, who decrypts the message by using it along with the algorithm in reverse. It is important that the parties involved always exchange the key discretely.

To secure the transfer of information better, conventional cryptography in modern times uses a strong encryption algorithm.

2. Caesar’s cipher

This is one of the earliest and most simple encryption techniques there is. It is commonly known as a substitution cipher.

In Caesar’s cipher, one substitutes the secret key with another. This involves offsetting letters of the alphabet or digits. Suppose the word “BITCOIN” is encrypted using Caesar’s key with the value of 4. To decrypt the message, the receiver offsets the letters so B is replaced by F, I by M, and so on. So the key is FMGSMR.

Compared to today’s encryption standard, Caesar’s cipher ends up being pretty weak, but it was good enough in the past.

3. Public key cryptography

Public key cryptography was first introduced to the public by cryptographers Martin Hellman and his students Whitfield Diffie and Ralph Merkle. Two decades later, in 1997, the fact that cryptography was in fact invented about five years before this came to light. The British Secret Service claimed that they had invented it but had to keep it secret due to security concerns.

Later on, public key cryptography would become the most talked about cryptographic algorithm due to its use in crypto.

With this type, a plaintext message is encrypted and decrypted using an asymmetric scheme involving a pair of keys. The public key encrypts the data, and the private one is used for decryption. The public key acts as an address and can be shared with the world.

So, this means, it plays out in two broad steps:

  • The sender first copies the public key, then encrypts the message, and finally broadcasts it using the same key.
  • Now, the person with the private key has the capability to decrypt and view the plaintext message.

It is not possible for anyone to deduce the private key from using the public key. The only caveat is that the receiver needs to keep the private key secure.

4. Hash function

This type of cryptographic algorithm doesn’t use any key. Instead, a hash value with a fixed length is calculated as per the plaintext. In other words, the hashing function converts a piece of big information to a small, practical integer value that can be used as an index in the hash table. This is what ensures that the content cannot be seen or recovered by an unauthorized person.

Advantages and disadvantages of cryptography

In a world, where everything, from a simple message to high-value bank transfers, happens online, cryptography becomes very important. But like all things in life, it comes with its pros and cons.

The advantages of cryptography

Some of its particularly advantageous features are:

  • Confidentiality: Only the intended recipient can access the encrypted message. Nobody else gets to access or see it.
  • Integrity: After encryption, nobody can alter the contents of the message. Neither in storage nor while changing hands.
  • Authentication: The identities of the sender and receiver are confirmed, and so is the origin and destination information. That makes authentication necessary.
  • Non-repudiation: With encryption, the sender/creator of the message cannot deny later that they had created or transferred the information.

The disadvantages of cryptography

Some disadvantages of cryptography that you should know are:

  • Difficult to access: Even legitimate users can find strongly encrypted digital information difficult to access. This is because one needs adequate computing power and resources to decode such information.
  • Computing resource supply needed not ensured: There is no guarantee that the many computing resources necessary for cryptography will always be available. The additional requirements, including properly designed systems, controls, and procedures to guard the system against threats, are also not guaranteed.
  • High cost: Adding a cryptographic layer to secure the information requires setting up and maintenance of public key infrastructure, and it also leads to delays in information processing.
  • High vulnerability: The security of cryptographic techniques is based on the computational difficulty of solving mathematical problems. With ever-increasing computational power, the risk of malicious actors breaking through the cryptographic algorithms increases.


The modern-day cryptographic algorithm leverages computing power to create a secure way of storing and transferring information. It protects data from attackers better than any other method.

The advent of crypto has led to the wide use of different cryptographic algorithms. With it, cryptography has emerged as a preferred way to secure and encrypt financial information. Bitcoin is a good example of how cryptography can be used in solving everyday problems with ease and low cost.

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