Bryant Nielson | August 3, 2023
Behind the scenes of every blockchain transaction and consensus mechanism lies powerful cryptographic code. Two keystone techniques provide the bedrock of security for blockchain platforms: hashing and public key encryption. This article will explain how they work, why they are indispensable, and provide real-world examples of their blockchain application.
First, hashing generates fixed-length fingerprint signatures used to validate and link blocks of data. Bitcoin applies SHA-256 hashing to transaction contents, timestamps, and chaining information to produce the digest securing each block. Even tiny changes in input produce entirely different hash outputs. This proves data integrity without revealing contents. Hash comparisons can efficiently verify if data matches the blockchain.
Second, public key infrastructure enables trusted communication between parties. Users hold unique public-private key pairs. The public key serves as an address to share. The private key allows the owner to digitally sign transactions. The signatures are irreproducible without the matching private key. Combined with hashing, this provides non-repudiation and authentication. Only the private key owner could have produced the signature.
For example, on the Bitcoin blockchain, a wallet address is derived from the public key. To spend funds, the spender signs the transaction with their private key. Nodes verify this by checking the signature matches the public address of the funds’ owner. This proves the spender has authority without exposing private keys.
Beyond transactions, hash functions and public keys secure the overall blockchain consensus mechanism. In proof-of-work systems like Ethereum, miners compete to solve computational hashing problems to create new valid blocks. The random challenge of finding suitable hashes requiring brute force means the probability of any one miner solving it is proportional to their computing power. This decentralizes consensus.
Meanwhile in proof-of-stake blockchains like Cardano, staked public keys select validators. The higher the stake in a valid unspent public key, the greater chance of being randomly chosen to validate the next block. This avoids concentrated mining power.
Along with encryption, hashing and public keys enable reliable P2P consensus and exchange without centralized authority. As blockchain evolves, additional cryptography like zero-knowledge proofs enhances privacy and security. But the fundamentals of hashing and PKI anchor the validity of the ledger. Their judicious application allows permissionless platforms to establish trust across millions of asynchronous nodes. The immutability and integrity blockchain promises relies wholly on the uncompromising math underpinning cryptography.