Bitcoin and security

Initially, Bitcoin contained three principles of encryption:

• Symmetric encryption;
• Asymmetric encryption;
• Hashing.

Symmetric encryption implies the application of a specific secret encryption key before the message is sent to the recipient. Also, data transmission includes a decryption key to be activated when a message is received. For example, let's encrypt the alphabet with numbers: "A" is "01", "B" is "02", etc. A message like "HELLO" is encrypted with the code "0805121215", and this value will be sent over the network to the recipient. All unauthorized parties will probably see the encrypted message "0805121215", but will not get a clear understanding of what it means. The encryption method is everything.

Asymmetric encryption cryptography includes two types of keys: public and private keys.

Each private key in Bitcoin is related to a public key in a 1: 1 ratio. The private key exists to be private and inaccessible to anyone. The public key can be shared with anyone. One type of key acts as a user identifier, and the second is proof that a user is a person. However, unlike a password, a private key cannot be reset or recovered if lost. The private key is an extremely important piece of data.

Due to the 1: 1 principle, public and private keys are interconnected in a cryptographic context. Private keys in Bitcoin form a public key using a digital signature algorithm. The private key is the input to this algorithm and generates a corresponding public key. However, the public key is never reconstructed to generate the corresponding private key. This is due to the one-sided nature of this algorithm.

Hashing is used to check the integrity of transaction data on the network correctly. The method maintains the blockchain data structure, encodes people's account addresses, and allows block mining. In addition, digital signatures complement cryptographic processes, and authentic participants can verify their identity online.

Bitcoin is expanding its privacy features as worries about the quality of the system grow. This is due to the recent wave of ransomware attacks. As a result, on June 15, Bitcoin quickly received its first update in 4 years, called Taproot.

The update will only take effect in November and will change the current Elliptic Curve Digital Signature Algorithm privacy signature, which is used to protect property rights and privacy.

Importance of Taproot

Taproot update is geared towards greater privacy and efficiency. The update will make transactions more confidential. The potential of smart contracts will be revealed to a greater extent. That is, transactions will become very similar to complex transactions with multiple signatures.

Today, smart contracts on the Bitcoin network require colossal amounts of storage space on the blockchain. Let's remember the knowledge base. The transaction fee depends on the amount of space the transaction wants to occupy in the block. The formation of smart contracts in Bitcoin is costly for this reason. After the update, smart contracts will become smaller and cheaper. Taproot will allow more people to use confidential wallets and services that make it harder to understand transaction paths.

Leaving rivals behind

Many app and product developers prefer smart contracts on the Ethereum blockchain, which is the second most popular blockchain in the world. The technologies of this cryptocurrency help to make transactions without the participation of a third party in an automatic mode, and this is important. The staggering rise in the price of Ethereum is also attributed to the growing demand for blockchain technology. After the Bitcoin update in November, developers will likely start using the Bitcoin blockchain and smart contracts for applications powered by DeFi technology.

Encryption is gaining more and more attention in the world of cryptocurrencies. The growing development of technology, and in particular, quantum computers leads to the need to change the principles of encryption. Is it true? If so, how soon will it happen?

To begin with, many of the encryption schemes that beat classical computers run the risk of not being able to cope with a sufficiently powerful quantum computer. For example, a speech about Grover's Algorithm. However, the hype about quantum computing and "quantum supremacy" is so far unfounded. The largest known quantum computer of our time can't fight against current encryption standards.

Dr. Joel Alven is Wickr's Chief Cryptographer. He believes that the development of quantum computers goes slowly by the lack of dialogue between the developers of quantum technologies and specialists in the field of cryptography. Dr. Alwen talks about cases where nation-states like China turned a blind eye to research related to quantum technology. This makes it unclear whether serious threat attempts can be made against today's encryption standards. Alternatively, there could be a sudden outage that could spell disaster for cryptocurrencies and other industries that rely on cryptography.

Thus, according to many scientists, global changes are possible in the future. Currently, commercially available quantum computers cannot significantly affect the encryption standards on which cryptocurrencies are based.