Introduction
Blockchain technology relies on advanced cryptography to:
- Secure transactions
- Maintain data integrity
- Verify identities without central authorities
This guide explains the two cryptographic pillars of blockchain:
- Hash Functions (Data fingerprinting)
- Digital Signatures (Transaction authentication)
We’ll explore how these work in Bitcoin, Ethereum, and other major blockchains.
1. Hash Functions: Blockchain’s Digital Fingerprints
What Are Cryptographic Hash Functions?
Hash functions convert any input into a fixed-size alphanumeric string (hash). Key properties:
- Deterministic – Same input always = same output
- One-way – Can’t reverse-engineer input from hash
- Avalanche Effect – Tiny input change = completely different hash
- Collision-resistant – Extremely unlikely two inputs produce same hash
Common Blockchain Hash Functions
| Algorithm | Used In | Hash Length | Features |
|---|---|---|---|
| SHA-256 | Bitcoin | 256-bit | Most widely adopted |
| Keccak-256 | Ethereum | 256-bit | Modified SHA-3 variant |
| Blake2b | Cardano | 512-bit | Faster verification |
How Blockchains Use Hashing
- Block Creation – Each block contains hash of previous block
- Merkle Trees – Efficiently verify transaction inclusion
- Address Generation – Public keys hashed to create wallet addresses
- Proof-of-Work – Miners find hashes meeting difficulty target
Real-World Example
Bitcoin block hashing:
- Combine block header elements
- Hash with SHA-256 twice
- Result must be below target value (proof-of-work)
2. Digital Signatures: Verifying Transactions
What Are Digital Signatures?
Digital signatures mathematically prove:
- Authenticity – Only private key owner could sign
- Integrity – Message wasn’t altered
- Non-repudiation – Signer can’t deny signing
How Signatures Work in Blockchain
- Key Generation – User creates public/private key pair
- Signing – Private key creates unique signature for transaction
- Verification – Network verifies using sender’s public key
Elliptic Curve Digital Signature Algorithm (ECDSA)
Most blockchains use ECDSA because:
- Smaller keys than RSA at same security level
- Faster computation
- Perfect for blockchain’s resource constraints
Signature Process:
- Generate random number (k)
- Calculate curve point (r,s)
- Combine with private key to create signature
Alternative Signature Schemes
- Schnorr Signatures (Bitcoin Taproot) – Enables signature aggregation
- EdDSA (Algorand) – Faster than ECDSA
- BLS Signatures (ETH 2.0) – Supports threshold signatures
3. Public Key Cryptography in Action
Wallet Creation Process
- Generate random private key (256-bit number)
- Derive public key using elliptic curve math
- Hash public key to create wallet address
Transaction Signing Flow
- Create transaction details
- Generate cryptographic hash of transaction
- Sign hash with private key
- Broadcast signed transaction to network
Signature Verification
Nodes verify by:
- Recovering public key from signature
- Checking it matches sender’s address
- Confirming signature validity
4. Comparing Cryptographic Approaches
| Feature | SHA-256 Hashing | ECDSA Signatures |
|---|---|---|
| Purpose | Data integrity | Authentication |
| Speed | Very fast | Relatively slow |
| Key Size | N/A | 256-bit private key |
| Reversibility | Impossible | Possible (public key recovery) |
| Blockchain Use | Block linking, PoW | Transaction signing |
5. Cryptographic Vulnerabilities & Protections
Potential Risks
- Quantum Computing – Could break ECDSA (future threat)
- Weak Randomness – Poor RNG compromises keys
- Algorithm Flaws – Theoretical hash collisions
Security Best Practices
- Use hardware wallets for key storage
- Verify cryptographic libraries
- Monitor for algorithm updates
- Implement multi-sig where possible
Post-Quantum Cryptography
Emerging solutions include:
- Lattice-based cryptography
- Hash-based signatures
- Multivariate cryptography
6. Real-World Blockchain Cryptography
Bitcoin’s Cryptographic Stack
- SHA-256 for hashing
- ECDSA (secp256k1) for signatures
- RIPEMD-160 for address generation
Ethereum’s Cryptographic Tools
- Keccak-256 for hashing
- ECDSA for signatures
- BLS signatures in ETH 2.0
Enterprise Blockchain Differences
Hyperledger Fabric supports:
- Pluggable cryptography modules
- Certificate Authorities
- Alternative algorithms
Conclusion
Blockchain cryptography provides:
- Immutability through hashing
- Authentication via digital signatures
- Trust minimization using public-key crypto
Key takeaways:
- Hash functions create blockchain’s unbreakable links
- Digital signatures prove ownership without revealing keys
- Different projects implement varying cryptographic approaches
As blockchain evolves, so too will its cryptographic foundations – ensuring continued security in the decentralized future.