Is it right to say that Bitcoin and other blockchains do not use encryption? I read somewhere that blockchains rely on digital signatures and hash functions but not on encryption, and that encryption is only used on the client side (e.g. crypto wallets)… But it seems that encryption is also part of these other cryptographic techniques… So I’m trying to clarify whether blockchain technology needs encryption or not. Thank you!
2 Answers
Bitcoin does not use encryption, and does not need to in order to secure ownership of coins. Ownership of coins is proven by digitally signing a transaction with the owner's private keys. The signature can be validated by anyone using the owner's public key.
Encryption obfuscates data for anyone that is not authorized to view (decrypt) it. Bitcoin cannot encrypt data that is stored in the blocks because the data needs to be able to be validated by all users (to prevent double spending).
Encryption is used, however in wallets to secure one's private keys, but that depends on the wallet software and how they've chosen to implement this type of protection. For example, Bitcoin Core wallet has a way to encrypt the wallet with a passphrase, see RPC Docs - Encrypt Wallet, but this is not essential for Bitcoin, users can use any wallet application.
Edit: As pointed out in the coments, a point of confustion is that Bitcoin uses Elliptic Curve cryptopgraphy, not RSA. This means that a digital signature in Bitcoin does not use encryption like RSA does, but instead an algorthm called ECDSA.
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Thank you for replying. In regards to the creation of digital signatures, is there any encryption in the process? I mean, using the private key to sign the transactions involves encryption or not really?– SlmkCommented Nov 29, 2018 at 21:13
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NP, The answer is no, in fact they are completely different algorithms. See en.wikipedia.org/wiki/Integrated_Encryption_Scheme and en.wikipedia.org/wiki/…– JBaczukCommented Nov 29, 2018 at 21:15
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Interesting. One last question... I heard that "digital signature is a hash string of the data encrypted with the private key and that pub key can decrypt it to see the hash in clear text"... So this sentence is completely wrong?– SlmkCommented Nov 29, 2018 at 21:24
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Yeah that's not quite right because they are different algorithms. Generally put, "A digital signature is the result of running the data hash through the digital signature algorithm along with the private key."– JBaczukCommented Nov 29, 2018 at 21:28
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4@Shala There are some digital signature algorithms for which signing is effectively "encrypting with the private key", most notably RSA. This is not true for all algorithms though, and certainly not for ECDSA (also, ECDSA cannot be used for encryption at all). Commented Nov 29, 2018 at 21:32
As @JBaczuk pointed out Bitcoin‘s blockchain does not use encryption. However, other schemes like ZeroCash (ZCash) and Monero do use encryption to send private data to the receiver. In these confidential currencies the miner does not need all the information to verify a transaction. It only learns that the transaction is correct not why it is correct. The transaction details, such as the amount, is then encrypted under the receivers public key such that the receiver can later spend the transaction outputs.
answered Dec 7, 2018 at 4:17
