Discover why cryptocurrencies are called cryptocurrencies and why the private key is so important to protect.
- [Instructor] We refer to bitcoin and other altcoins as cryptocurrency, or even cryptos. Why is that? What does it mean? The part of the word, crypto, comes from a process broadly called cryptography. In addition to proof-of-work, it's essential to the function of cryptocurrency. It's also where we'll focus our attention on security because it requires a component that is a potential weakness, the private key. Cryptography comes from Greek, and it means secret writing.
It describes methods to make a message that is sent from one person to another, private, only to them. If someone who isn't permitted to see the message intercepts it, they shouldn't be able to understand it. The message is sent in what appears to be nonsense text called ciphertext, and the recipient must have a mechanism to convert it to readable text called cleartext. For example, the receiver might have a cheat sheet that enables them to understand the code.
The cheat sheet could list how each letter is converted. An A is B, a B is C, a C is D, and so on. Cryptography has been used for hundreds of years to send messages, particularly in war time to protect special instructions from being apprehended and understand by an adversary. Cryptography is important for modern computing. I think we all agree that there is data and information that should be sent over networks in ciphertext.
One of the most popular forms of computing cryptography is called public key infrastructure, or PKI. As with so many concepts, it's both conceptually simple and powerful. I'll describe it here in the simplest terms. If you want to get into the details, you might consider watching this course on cryptography on LinkedIn Learning. PKI involves the generation of two keys, a public key and a private key.
You can think of a public key as an address, and a private key as something that provides access to whatever is at that address. If a public key was a mailbox, everyone would know the identity and location of it and could put a letter in it, but only a person with the private key could open the mailbox. If no one gets the private key, the mailbox is secure. Remember that for later. In the digital world, public and private keys take the form of a long sequence of numbers and letters.
A private key is randomly generated first. There are many online programs to do this. Check out, for example, bitaddress.org. Now, using a hashing algorithm, as we discussed in a previous video, we can create a public key from the private key. Voila, we have a private and public key. Next, we'll discuss how these keys are used to enable cryptography.