Problems cryptography solves
In this day and age, millions of people use devices and are connected to each other. While these different users may trust each other, data and communications transferred between them may often travel along networks that cannot be trusted (such as the public internet, for example). Cryptography has become an important aspect of computing in the digital era.
More specific use cases for cryptography have emerged such as digital signature systems that help parties remotely execute contracts and agreements (e.g., the services developed by DocuSign (DOCU -1.37%)). Cryptography can also be used to protect information that is not in transit on a network, also called data at rest. Many types of records and databases are stored digitally now, so cryptography services are developed by cybersecurity companies to help protect organizations' critical information.
How cryptography is used in cryptocurrency
Finance is another area in which cryptography is being applied. Cryptocurrency is an example of how a network will make use of multiple encryption methods to execute, verify, and protect financial transactions.
Cryptocurrency makes use of asymmetric cryptography and hash functions. Bitcoin (BTC -0.36%) was the trailblazer in its use of encryption. A public key is provided for all users, along with a hash function, from which users can send and receive the digital currency. A private key is utilized to digitally "sign" a transaction to ensure the origin of a transaction is legitimate. These transactions are then recorded on Bitcoin's blockchain, a distributed ledger system that is available for anyone who wishes to use the Bitcoin network.
A hashing function is used by other blockchain networks, such as Ethereum (ETH -2.28%), to record information. The speed in which this mathematical puzzle is solved by a computer (or network of computers) is called the hash rate.
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