One of the main differences between cryptocurrency and fiat money is the system of anonymity in digital transactions. In addition, the particle "crypto" in the term "cryptocurrency" indicates the use of cryptography (information encryption technology) to indicate the identity of participants in cryptocurrency transfers.
In this article, we will talk about what cryptography is and how encryption technology is used in cryptocurrencies, how the Monero, Dash, ZCash anonymous cryptocurrencies work, and also consider what encryption protocol Grin coin was developed for.
Anonymity in cryptocurrency: cryptography
Translated from Greek, the term "cryptography" means "hidden writing." In the modern world, this word denotes methods for encryption, information hiding. Cryptography methods are a system of algorithms that help to secure the receipt of information in such a way that it becomes clear only to the sender and recipient.
One of the easiest examples of cryptocurrency encryption is types -2 or +3 (Caesar's encryption). For example, by the type of encryption +3: A = G, B = E, Z= I.
Cryptocurrencies = Fubswrfxuuhqflhv
Or the principle of encryption -2, where O = M, and T= R
Cryptocurrencies = Apwnrmasppclagcq
By similar systems, the names of participants in the transaction in cryptocurrencies are encrypted. Of course, much more complex manipulations are used to encrypt digital money.
In cryptography, there are two basic concepts: cipher and key. These terms are relevant for message encryption and for the security of cryptocurrency payments. A cipher is a system of rules that are used to encode information. The key is the values for decrypting the cipher. That is, using the previous encryption example of Julius Caesar, an example of a cipher is a shift of X letters, and the key value is +3 or -2. Cryptocurrency also uses these terms, but there are only two keys here – private and public (which is used to transfer money).
Anonymous cryptocurrencies: Monero, Dash, ZCash
The Monero, Dash, ZCash cryptocurrencies are a vivid example of how cryptography can make each transaction as anonymous as possible. Thanks to cryptographic protocol systems, these currencies make the audit of information on the network completely impossible.
Anonymous ZCash cryptocurrency was developed on the basis of the Zerocoin and ZeroCash protocols by cryptographers from Johns Hopkins University. A condition that assumes the anonymity of this system is a zero-disclosure evidence protocol, zk-SNARK. Thanks to the zk-SNARK protocol, with all the information about transactions completed, only timestamps remain visible. Moreover, the system is able to verify the accuracy of all transactions. Another feature of ZCash: absolutely all tokens in the system are interchangeable, that is, it is impossible to trace the history of payments.
Speaking of another anonymous cryptocurrency, Monero, transaction encryption here takes place using the CryptoNote protocol, which includes stealth-addresses and ring signatures. Components for Monero enhanced anonymity were created by an unknown author under the pseudonym Nicholas van Saberhagen.
An anonymous Bitcoin fork, the Dash cryptocurrency (originally: XCoin), also enhances the anonymity of its customers. In the case of Dash, privacy is maintained by mixing coins, where each token is interchangeable. The technology for mixing cryptocurrency transactions is called PrivateSend, and works on the basis of CoinJoin technology.
Encryption Protocols: Grin and Beam Cryptocurrencies
The recently appeared Grin and Beam cryptocurrencies have become quite popular due to the increased payment security system. This effect was achieved through the introduction of the new MimbleWimble privacy protocol. Although the coins appeared only this winter, the protocol was presented back in the fall of 2016.
It is interesting! The MimbleWimble privacy protocol is named after the Harry Potter spell, which makes you speechless. At the same time, the protocol developer himself wished to remain anonymous and signed his name – Tom Marvolo Riddle (the name of the evil wizard Voldemort from Harry Potter).
MimbleWimble encryption works by the elliptic curve method during transaction signing. In addition, the protocol is based on the CoinJoin solution (coin mixing, similar to Dash) and Confidential Transactions (cryptocurrencies are specified in the softfork consensus, although they can also be added to the side chain).
Editor: Godfrid Brower