Ethereum relies heavily on cryptography to secure its network, transactions, and applications. Cryptography refers to the set of techniques used to encrypt and decrypt information to protect it against unauthorized access or tampering. On the Ethereum blockchain, cryptography is used to verify transactions, secure accounts, and create decentralized applications (dApps).
An Overview of Cryptography
Cryptography is essentially the art of writing and solving codes. It allows for secure communication between two parties in the presence of adversaries. There are several cryptographic techniques that are commonly used:
Symmetric Encryption
This involves using the same secret key to encrypt and decrypt a message. The sender encrypts the message with the key and the receiver decrypts it using the same key. Examples include AES and 3DES.
Asymmetric Encryption
Uses a public-private key pair to encrypt and decrypt messages. The public key encrypts and the private key decrypts. RSA is an example.
Cryptographic Hash Functions
These are one-way functions that take an input and produce a unique output known as a hash value or digest. SHA-256 is a common hash function.
Digital Signatures
Allow a sender to attach a code that identifies them uniquely to a document. It binds the sender’s identity to the document.
Cryptography in Ethereum
Cryptography is deeply ingrained in Ethereum’s design and inner workings. Here are some key areas where crypto is used:
Public/Private Keys
Every user account on Ethereum has a public-private key pair associated with it. The public key acts like an address to which coins can be sent to while the private key allows the owner to digitally sign transactions.
Hashing
Extensively used for hashing data like account addresses, transactions, smart contract bytecode etc. Keccak-256 is the default hash function.
Digital Signatures
Used to authorize transactions before they are executed. Users sign transactions with their private keys to prove ownership.
Encryption of Data
DApps can use symmetric or asymmetric encryption to securely store and transmit data on the blockchain. Keys are managed by the smart contracts.
Zero-Knowledge Proofs
Allow transactions and computations to be verified without revealing inputs. Used in privacy focused dApps for anonymity.
Consensus Algorithm
Ethereum’s proof-of-work consensus relies on cryptographic hashing to mine new blocks. Miners compete to solve puzzles using computing power.
In essence, cryptography protects Ethereum’s decentralized nature by enabling trustless interactions between participants. Next, we’ll explore some specific applications of crypto in Ethereum.
Securing Ethereum Accounts with Public/Private Keys
User accounts in Ethereum have a cryptographic public/private key pair associated with them. The public key or address is shared openly and acts like a deposit box for receiving funds. The private key provides authorization to spend funds from the account.
Here’s how they work in detail:
- The public key is derived from the private key using elliptic curve cryptography. But it is impossible to reverse engineer the private key from the public key.
- The public key is converted into a Ethereum account address, which is a shorter hexadecimal string using the Keccak-256 hash function.
- Users can share their address to receive payments from others. The address by itself does not reveal any information about the owner.
- The private key is used to generate digital signatures on transactions. This proves the owner is authorizing the transaction.
- The private key must be kept secure and not shared. Whoever has access to it can spend funds from the account.
- Even the Ethereum network or dApps do not have access to a user’s private key. It is entirely the user’s responsibility.
Thus, by utilizing cryptographic key pairs, users have complete control over their funds in a trustless manner. They do not need to depend on any third-party or centralized system to authorize transactions.
Hashing for Data Integrity
Hashing is used pervasively in Ethereum’s blockchain to ensure the integrity of data. A hash function takes an input string of any length and converts it into a fixed length alphanumeric string known as the hash value. This has several important properties:
- It is a one-way function – impossible to recover the original data from the hash
- Any change in the input results in a completely different hash
- Highly efficient to compute hashes even for large inputs
- Extremely low probability of collisions (two inputs giving the same hash)
These properties allow hashes to be used as a fingerprint for data. Some examples of hashing in Ethereum include:
- Transaction hashes – Each transaction has a Keccak-256 hash that acts as the transaction ID
- Account hashes – External or contract accounts have a hash derived from the public key
- Block hashes – Each new block added gets a hash that identifies it uniquely
- Merkle trees – Hashes of data are combined and hashed up into a Merkle root in blocks
- Mapping data – Hashes can be used as keys to map and lookup data in smart contracts
By incorporating hashes deeply, Ethereum enables efficient and secure verification of large amounts of data. Nodes can quickly compare hashes instead of the entire data to check for any discrepancies. This allows light clients to trustlessly sync with the network.
Digital Signatures and Transaction Authorization
Digital signatures play a critical role in Ethereum by enabling transactions to be authorized in a decentralized manner. Here is how they work:
- To initiate a transaction, the sender assembles the required data like recipient, amount, data payload etc.
- The transaction data is then cryptographically signed using the sender’s private key and Ethereum’s Elliptic Curve Digital Signature Algorithm (ECDSA).
- This signature can be validated by anyone using the sender’s public key without revealing the private key.
- Full nodes check if the signature is valid before propagating and executing the transaction.
- Miners have to verify the signature again before including a transaction in a block. Invalid ones are rejected.
- The signature uniquely binds the sender to the transaction, authorizing the transfer of funds.
The end result is that transactions can only be executed if properly signed by the sending account’s owner. Forged or tampered transactions will result in invalid signatures. This prevents theft of funds and enables trustless transacting between users.
Encrypting Data in Smart Contracts
Smart contracts handle and store data on the blockchain for DApps. Sensitive data like passwords, keys, personal information etc. should not be kept in plain text. Ethereum enables encryption of such data using cryptographic mechanisms like AES and RSA.
Some examples of implementing encryption in smart contract data storage are:
- Using symmetric encryption (like AES) to securely store data like passwords, keys, account details etc. Access can be restricted using permissions managed in the contract.
- Encrypting private user data before storing in public contracts. The encryption keys can be managed by the user or a private contract.
- Using asymmetric encryption (like RSA) to implement public/private key infrastructure within contracts like issuing user certificates.
- Hashing and salting user passwords before saving them. This prevents passwords being leaked even if data is compromised.
- Encrypting data but storing permissioned decryption keys in separate restricted contracts for better security.
- Deploying contracts that handle encryption but limit visibility of keys or encrypted data using access controls.
With proper cryptographic design, dApps can minimize exposure of sensitive user data stored on-chain. The keys themselves can be kept securely off-chain if required.
Zero Knowledge Proofs for Transaction Privacy
Zero knowledge proofs are a cryptographic technique that allows a user to prove to another party that they know a certain piece of information without revealing the actual information. This is extremely useful for privacy.
In Ethereum, they are currently implemented using zkSNARKs. Here are some examples of how they are applied:
- To enable anonymous transactions on the blockchain without publicly revealing the sender, receiver or transferred amount. Only the validity of the transaction is confirmed.
- To prove ownership and authorization of an account without exposing the private key.
- To enable private trades on decentralized exchanges without revealing the traded assets or quantities.
- To validate correct execution of computations in a smart contract without revealing the input data.
Zero knowledge proofs require significant computation for proof generation and verification. But they enable exciting use cases like anonymous transfers, confidential smart contracts, and private decentralized finance platforms.
Ethereum Mining and Proof-of-Work
Ethereum currently relies on Proof-of-Work mining to add new blocks to the blockchain. This involves solving a challenging cryptographic puzzle using computing power. It gives several benefits:
- Allows fair, open participation to anyone with a computer
- Makes it economically competitive to play by the rules rather than cheat
- Provides eventual consensus on the valid chain even with protocol forks
- Removes need for centralized authority to dictate validity of transactions
Here is how mining with cryptographic hashing works:
- Miners compile recent valid transactions and other data into a block candidate
- The block data is hashed repeatedly with different nonce values to get a hash smaller than the target difficulty
- This is extremely unlikely and requires enormous amounts of random guesses and computing power
- The first miner to find a valid hash broadcasts the block and gets a reward
- Other nodes easily verify the hash is correct for that block data
- The new block is added to the existing blockchain
By leveraging cryptographic hashing, proof-of-work enables decentralized consensus and security even in adversarial environments. Ethereum is planned to eventually migrate to the more energy efficient Proof-of-Stake consensus.
Conclusion
Cryptography is an essential enabling technology for the functioning, security and privacy of Ethereum and its decentralized applications. Core components like digital signatures, hashing, encryption and zero knowledge proofs are extensively used to build trust without requiring centralized authority.
As Ethereum evolves in the future, we can expect cutting-edge cryptographic research to be incorporated into the platform. This will enhance scalability, security and privacy – bringing decentralization into mainstream adoption.
Frequently Asked Questions
Q: What is cryptography?
A: Cryptography refers to techniques like encryption, hashing, and digital signatures that allow secure communication and operations on data even in untrusted environments.
Q: Why is cryptography important for blockchains like Ethereum?
A: It enables critical functionality like decentralized transactions, data integrity, confidentiality, and anonymity that are essential for Ethereum to operate without centralized intermediaries.
Q: What are the main cryptography mechanisms used in Ethereum?
A: Public-private key pairs, hashing functions like Keccak-256, digital signatures using ECDSA, zero knowledge proofs like zkSNARKs, and proof-of-work mining based on cryptographic puzzles.
Q: How are user accounts secured in Ethereum?
A: Each account has a public-private key pair derived using elliptic curve cryptography. The private key provides authorization via digital signatures.
Q: What role do hashes play in Ethereum?
A: Hashes are extensively used to identify transactions, blocks, accounts and data immutably and efficiently across the blockchain.
Q: How do digital signatures authorize transactions?
A: Signing the transaction data with the sender’s private key enables full nodes and miners to cryptographically verify the origin and authorization of transactions.