History

See also: History of bitcoin

In 1983, American cryptographer David Chaum conceived of a type of cryptographic electronic
money called ecash.[13][14] Later, in 1995, he implemented it through Digicash,[15] an early form of
cryptographic electronic payments. Digicash required user software in order to withdraw notes from a
bank and designate specific encrypted keys before it can be sent to a recipient. This allowed the digital
currency to be untraceable by a third party.
In 1996, the National Security Agency published a paper entitled How to Make a Mint: The
Cryptography of Anonymous Electronic Cash, describing a cryptocurrency system. The paper was first
published in an MIT mailing list[16] and later in 1997 in The American Law Review.[17]
In 1998, Wei Dai described "b-money", an anonymous, distributed electronic cash system.[18] Shortly
thereafter, Nick Szabo described bit gold.[19] Like Bitcoin and other cryptocurrencies that would follow
it, bit gold (not to be confused with the later gold-based exchange BitGold) was described as an
electronic currency system which required users to complete a proof of work function with solutions
being cryptographically put together and published.
In January 2009, Bitcoin was created by pseudonymous developer Satoshi Nakamoto. It used SHA-256,
a cryptographic hash function, in its proof-of-work scheme.[20][21] In April 2011, Namecoin was created
as an attempt at forming a decentralized DNS. In October 2011, Litecoin was released which
used scrypt as its hash function instead of SHA-256. Peercoin, created in August 2012, used a hybrid of
proof-of-work and proof-of-stake.[22]
See also: Cryptocurrency bubble § History
Cryptocurrency has undergone several periods of growth and retraction, including several bubbles
and market crashes, such as in 2011, 2013–2014/15, 2017–2018 and 2021–2023.[23][24]
On 6 August 2014, the UK announced its Treasury had commissioned a study of cryptocurrencies, and
what role, if any, they could play in the UK economy. The study was also to report on whether
regulation should be considered.[25] Its final report was published in 2018,[26] and it issued a
consultation on cryptoassets and stablecoins in January 2021.[27]
In June 2021, El Salvador became the first country to accept Bitcoin as legal tender, after
the Legislative Assembly had voted 62–22 to pass a bill submitted by President Nayib
Bukele classifying the cryptocurrency as such.[28]
In August 2021, Cuba followed with Resolution 215 to recognize and regulate cryptocurrencies such as
Bitcoin.[29]
In September 2021, the government of China, the single largest market for cryptocurrency, declared all
cryptocurrency transactions illegal. This completed a crackdown on cryptocurrency that had
previously banned the operation of intermediaries and miners within China.[30]
On 15 September 2022, the world's second largest cryptocurrency at that time, Ethereum transitioned
its consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS) in an upgrade process
known as "the Merge". According to the Ethereum Founder, the upgrade can cut both Ethereum's
energy use and carbon-dioxide emissions by 99.9%.[31]
On 11 November 2022, FTX Trading Ltd., a cryptocurrency exchange, which also operated a
crypto hedge fund, and had been valued at $18 billion,[32] filed for bankruptcy.[33] The financial impact
of the collapse extended beyond the immediate FTX customer base, as reported, [34] while, at
a Reuters conference, financial industry executives said that "regulators must step in to protect crypto
investors."[35] Technology analyst Avivah Litan commented on the cryptocurrency ecosystem that
"everything...needs to improve dramatically in terms of user experience, controls, safety, customer
service."[36]

Bitcoin protocol
The Bitcoin protocol is the set of rules that govern the functioning of Bitcoin. Its key components and
principles are: a peer-to-peer decentralized network with no central oversight;
the blockchain technology, a public ledger that records all Bitcoin transactions; mining and proof of
work, the process to create new bitcoins and verify transactions; and cryptographic security.
Users broadcast cryptographically signed messages to the network using Bitcoin cryptocurrency
wallet software. These messages are proposed transactions, changes to be made in the ledger. Each
node has a copy of the ledger's entire transaction history. If a transaction violates the rules of the
Bitcoin protocol, it is ignored, as transactions only occur when the entire network reaches a consensus
that they should take place. This "full network consensus" is achieved when each node on the network
verifies the results of a proof-of-work operation called mining. Mining packages groups of transactions
into blocks, and produces a hash code that follows the rules of the Bitcoin protocol. Creating this hash
requires expensive energy, but a network node can verify the hash is valid using very little energy. If a
miner proposes a block to the network, and its hash is valid, the block and its ledger changes are added
to the blockchain, and the network moves on to yet unprocessed transactions. In case there is a
dispute, then the longest chain is considered to be correct. A new block is created every 10 minutes, on
average.
Changes to the Bitcoin protocol require consensus among the network participants. The Bitcoin
protocol has inspired the creation of numerous other digital currencies and blockchain-based
technologies, making it a foundational technology in the field of cryptocurrencies.
10 Blockchain Protocols to Know
For ease and comfort, our experts have researched the top ten blockchain protocols you need to know.
Below is a list of the blockchain protocols we have gathered from the best crypto education
resources worldwide.
1. Smart Contract & Ethereum

Ethereum is the second largest cryptocurrency according to world market capitalization, and we often
refer to it as the “world computer.” The Ethereum network is designed as a decentralized platform for
building and running applications, focusing on smart contracts.

A smart contract is a self-executing system that helps to settle agreements between buyer and seller
available in lines of code. This scene means the contract can automatically execute when the platform
meets certain conditions without intermediaries.

Ethereum has several features that make it an attractive platform for developers. For example, it has a
built-in programming language called Solidity, making it easy for developers to write smart contracts.
Additionally, the designs of the Ethereum network are scalable. It can handle many transactions per
second, making it ideal for decentralized applications requiring large amounts of data.

2. Proof-of-work Consensus Mechanism & Bitcoin

Bitcoin is the largest crypto available according to market capitalization and is often considered the
“gold standard” of cryptocurrencies. The Bitcoin network is a decentralized digital currency and peer-
to-peer payment system that allows users to send and receive payments without intermediaries.

One of the critical features of the Bitcoin network is its decentralized nature, which means that any
single entity does not control it. This offer provides a high level of security and makes it difficult for
governments or other organizations to interfere with transactions. Additionally, the Bitcoin network
uses a proof-of-work consensus mechanism, which requires participants to contribute computational
power to validate transactions and secure the network.
3. Proof-of-stake Consensus Mechanism in Binance Smart Chain
Binance Smart Chain (BSC) is a high-performance blockchain network launched by Binance, one of the
largest cryptocurrency exchanges in the world. The Binance Smart Chain is designed for decentralized
applications and enables fast and low-cost transactions.
One of the critical features of the Binance Smart Chain is its scalability, which allows it to handle a
large number of transactions within a short period of time. This system makes it an ideal platform for
decentralized applications requiring a high volume of data. Additionally, Binance Smart Chain uses a
proof-of-stake consensus mechanism. However, this system makes the network more energy-efficient
than the usual proof-of-work mechanism used by Bitcoin.

4. Ouroboros and Cardano (ADA)

Cardano is a blockchain platform for secure and sustainable decentralized applications and smart
contracts. It uses a proof-of-stake consensus mechanism(Ouroboros), which means that participants
validate transactions by holding and staking their tokens.

One of the critical features of Cardano is its focus on sustainability, which means that it is designed to
be energy-efficient and have a low carbon footprint. Additionally, Cardano uses a modular architecture
that allows it to be upgraded and improved over time, making it a future-proof platform for
decentralized applications.

5. Polkadot (DOT) & Parachains

Polkadot is a multi-chain network that enables interoperability between different blockchain systems.
This network means that developers can build decentralized applications to communicate and transfer
data between other blockchains, making it possible to create more complex and interconnected
applications. In addition, Polkadot enables the transfer of assets and information between different
blockchains and provides a shared security model for all connected chains.

6. Proof of Stake & Solana

Solana is a fast and scalable blockchain protocol designed for decentralized finance applications.
Solana uses a unique consensus algorithm, Solana Proof of Stake (PoS), which enables it to process
thousands of transactions per second. Solana strongly focuses on developer adoption and provides
several tools and resources to help developers build on the platform.

7. Chainlink (LINK) & Oracle Network

Chainlink is a Bitcoin-like oracle network that is capable of supplying real-world data to smart
contracts. Chainlink enables smart contracts to access data from external sources, such as stock prices,
weather data, etc. This link allows the creation of decentralized applications that can interact with the
real world, making it possible to create a wide range of new decentralized applications.

8. Cosmos (ATOM) & DeFi

Cosmos is a decentralized network with independent blockchains that enables the transfer of assets
and information between different blockchains. Cosmos provides a shared security model for all
connected chains and offers fast and secure transactions. Cosmos strongly focuses on scalability and
interoperability, making it a popular choice for decentralized exchanges and DeFi projects.

9. Smart Contracts & TRON (TRX)

TRON is a decentralized platform that enables the creation of smart contracts and decentralized
applications. TRON has its cryptocurrency, TRONix (TRX), used to pay transaction fees and
computational services within the network.

TRON’s strong focus on the entertainment industry provides a platform for content creators to publish,
store, and monetize their digital content. TRON also has a large and active community, and it has
partnerships with several well-known companies in the entertainment industry.
10. Proof of Stake & Hive (HIVE)
Hive is a blockchain protocol with designs similar to decentralized social media applications. Hive
provides fast and secure transactions and has a large and active community of content creators and
curators. Hive is known for its focus on society and a strong culture of collaboration and engagement.

Finally, these top ten recommended blockchain protocols represent a diverse range of use cases and
technologies, impacting the world of decentralized systems. Each protocol has unique strengths and
weaknesses, and it is up to developers and users to determine which protocols best suit their need

Symmetric-key cryptography

Cryptography in Blockchain

Cryptography is a method of securing data from unauthorized access. In the blockchain,

cryptography is used to secure transactions taking place between two nodes in a blockchain
network. As discussed above, in a blockchain there are two main concepts cryptography and hashing.
Cryptography is used to encrypt messages in a P2P network and hashing is used to secure the block
information and the link blocks in a blockchain.
Cryptography primarily focuses on ensuring the security of participants, transactions, and
safeguards against double-spending. It helps in securing different transactions on the blockchain
network. It ensures that only the individuals for whom the transaction data is intended can obtain,
read and process the transaction.

Role of Cryptography in Blockchain

Blockchain is developed with a range of different cryptography concepts. The development of

cryptography technology promotes restrictions for the further development of blockchain.
 In the blockchain, cryptography is mainly used to protect user privacy and transaction
information and ensure data consistency.
 The core technologies of cryptography include symmetric encryption and asymmetric
encryption.
 Asymmetric cryptography uses digital signatures for verification purposes, every transaction
recorded to the block is signed by the sender by digital signature and ensures that the data is not
corrupted.
Cryptography plays a key role in keeping the public network secure, so making it fit to maintain the
integrity and security of blockchain.

Cryptography

Cryptography is a technique or a set of protocols that secure information from any third party during
a process of communication. It is also made up of two Greek terms, Kryptos term meaning “hidden”
and Graphein, a term meaning “to write”. Some terminologies related to Cryptography:
 Encryption: Conversion of normal text to a random sequence of bits.
 Key: Some amount of information is required to get the information of the cryptographic
algorithm.
 Decryption: The inverse process of encryption, conversion of a Random sequence of bits to
plaintext.
 Cipher: The mathematical function, i.e. a cryptographic algorithm which is used to convert
plaintext to ciphertext(Random sequence of bits).
Types of Cryptography

The two types of cryptography are:

 Symmetric-key cryptography.
 Asymmetric-key cryptography.
Let’s discuss each of these topics in detail.
1. Symmetric-key Encryption : It focuses on a similar key for encryption as well as decryption. Most
importantly, the symmetric key encryption method is also applicable to secure website connections
or encryption of data. It is also referred to as secret-key cryptography. The only problem is that the
sender and receiver exchange keys in a secure manner. The popular symmetric-key cryptography
system is Data Encryption System(DES). The cryptographic algorithm utilizes the key in a cipher to
encrypt the data and the data must be accessed. A person entrusted with the secret key can decrypt
the data. Examples: AES, DES, etc.
Features:
 It is also known as Secret key cryptography.
 Both parties have the same key to keeping secrets.
 It is suited for bulk encryptions.
 It requires less computational power and faster transfer.

Symmetric Cryptography

2. Asymmetric-key Encryption : This cryptographic method uses different keys for the encryption
and decryption process. This encryption method uses public and private key methods. This public
key method help completely unknown parties to share information between them like email id.
private key helps to decrypt the messages and it also helps in the verification of the digital signature.
The mathematical relation between the keys is that the private key cannot be derived from the
public key, but the public key can be derived from the private key. Example: ECC,DSS etc.
Features:
 It is also known as Public-key cryptography.
 It is often used for sharing secret keys of symmetric cryptography.
 It requires a long processing time for execution.
 Plays a significant role in website server authenticity.

Asymmetric Cryptography

Public key cryptography

Blockchain technology is one of the greatest innovations of the 21st century. In this article, we will
focus on the concept of cryptography i.e. public-key cryptography or Asymmetric key cryptography.

Introduction To Public-Key Cryptography

Most of the time blockchain uses public-key cryptography, also known as asymmetric-key
cryptography. Public key cryptography uses both public key and private key in order to encrypt and
decrypt data. The public key can be distributed commonly but the private key can not be shared with
anyone. It is commonly used for two users or two servers in a secure way.
Public Key: Public keys are designed to be public. They can be freely given to everyone or posted on
the internet. By using the public key, one can encrypt the plain text message into the cipher text. It is
also used to verify the sender authentication. In simple words, one can say that a public key is used
for closing the lock.
Private Key: The private key is totally opposite of the public key. The private key is always kept
secret and never shared. Using this key we decrypt cipher text messages into plain text. In simple
words, one can say that the private key is used for opening the lock.

Why Do We Need Public-Key Cryptography?

 In symmetric-key cryptography, a single key is used to encrypt and decrypt the message. Here,
the possibility of data loss or unauthorized access to data is high. To overcome the unauthorized
access of data and data sent securely without any loss, we use public-key cryptography.
 Public-key cryptography is more secure than symmetric-key cryptography because the public
key uses two keys to encrypt and decrypt the data
 Public-key cryptography allows users to hide the data that they want to send. The sender
encrypts the data and the receiver decrypts the data. The encrypted message is not understood
by unauthorized users.

Working On Public-Key Cryptography

Suppose, the sender wants to send some important message to the receiver.
 The sender first creates a message in the form of plain text which is in a readable format.
 The sender knows the public key of the receiver but doesn’t know the private key of the receiver
because the receiver keeps secret his private key. With the help of the public key of the receiver
and the private key of the sender, the sender generates the encrypted message i.e. called cipher
text. Cipher text is in an unreadable format. In this step, plain text converts into cipher text.
 Now, cipher text reaches the receiver end. The receiver knows its own private key, and with the
help of the private key receiver converts the cipher text into readable format i.e. plain text.
The below example shows the working of public-key cryptography.

Let us try to under the working of public-key cryptography with an example. Suppose Sachin is the
sender who wants to send a message to Anurag. Here Anurag is the receiver.
 Sachin uses Anurag’s public key to encrypt the message and Anurag uses his own private key to
decrypt the message.
 First Sachin creates plain text. Sachin has access to Anurag’s private key and cipher text. Using
Anurag’s public key and his own public key,
 Sachin will generate an encrypted message i.e. cipher text which is in an unreadable format. After
applying the encryption process plain text converts into cipher text.
 Now, Anurag receives a cipher text. First Anurag will decrypt the cipher text message into a
readable format. For decrypting Anurag will use the private key. Now cipher text converts into
 plain text and is readable by the receiver. Because Sachin keeps his private key, Anurag knows
that this message couldn’t have come from anyone else. This is also called a digital signature.

Benefits of Public-key Cryptography

 Authentication: It ensures to the receiver that the data received has been sent by the only
verified sender.
 Data integrity: It ensures that the information and program are changed only in a specific and
authorized manner.
 Data confidentiality: It ensures that private message is not made available to an unauthorized
user. It is referred to as privacy or secrecy.
 Non-repudiation: It is an assurance that the original creator of the data cannot deny the
transmission of the said data to a third party.
 Key management: Public-key cryptography allows for secure key management, as the private
keys are never transmitted or shared. This eliminates the need for a secure channel to transmit
the private key, as is required in symmetric key cryptography.
 Digital signatures: Public-key cryptography allows for the creation of digital signatures, which
provide non-repudiation and can be used to verify the authenticity and integrity of data.
 Key exchange: Public-key cryptography enables secure key exchange between two parties,
without the need for a pre-shared secret key. This allows for secure communication even if the
parties have never communicated before.
 Secure communication: Public-key cryptography enables secure communication over an
insecure channel, such as the internet, by encrypting the data with the public key of the recipient,
which can only be decrypted by the recipient’s private key.
 Versatility: Public-key cryptography can be used for a variety of purposes, such as secure
communication, digital signatures, and authentication, making it a versatile tool for securing data
and communications.

Limitation of Public-Key Cryptography

 One can encrypt and decrypt the fixed size of messages or data. If there is an attempt to encrypt
or decrypt a large size of the message then the algorithm demands high computational power.
 The main disadvantage of this algorithm is that if the receiver losses its private key then
data/message will be lost forever.
 If someone has access private key then all data will be in the wrong hand.
 There are many secret-key which is faster than public-key cryptography.
 Key distribution: The process of securely distributing public keys to all authorized parties can
be difficult and time-consuming, especially in large networks.
 Performance: Public-key cryptography is generally slower than symmetric-key cryptography
due to its more complex algorithms, making it less suitable for applications that require fast
processing speeds.
 Security assumptions: Public-key cryptography relies on mathematical assumptions about the
difficulty of certain problems, such as factoring large numbers, which may not hold true in the
future. As a result, public-key cryptography is vulnerable to future advancements in computing
power and algorithmic breakthroughs.
 Susceptibility to man-in-the-middle attacks: Public-key cryptography is vulnerable to man-in-
the-middle attacks where an attacker intercepts and alters the public key before it reaches the
intended recipient. This can result in the attacker being able to decrypt the message or
impersonate the sender.
 Complexity: Public-key cryptography can be more complex to understand and implement than
symmetric-key cryptography, requiring specialized knowledge and expertise.
A digital signature is a mathematical scheme that is used to verify the integrity and authenticity of
digital messages and documents. It may be considered as a digital version of the handwritten
signature or stamped seal. The digital signatures use asymmetric cryptography i.e. also known as
public key cryptography.

What are Digital Signatures?

Digital signatures use asymmetric key cryptography. Asymmetric key cryptography also known as
public key cryptography uses public and private keys to encrypt and decrypt data.
 The public key can be shared with anyone.
 The private key is the secret key that is kept a secret.
In short, it can be summarized as a digital signature a code that is attached to the message sent on
the network. This code acts as proof that the message hasn’t been tampered with along its way from
sender to receiver.
A digital signature is intended to solve the problem of tampering and impersonation and tampering
thus it gives a recipient reason to believe:
 The message is sent by the claimed sender i.e. Authentication.
 The sender cannot deny having sent the message i.e. Non-repudiation.
 The message was not altered in the transit i.e. Integrity.
Why are Digital Signatures Important?
Digital signatures are important to achieve three results: Data integrity, authenticity, and non-
repudiation.
1. Data Integrity: It is preserved by using the hash function in signing and verifying algorithms.
Any change in the message will produce a completely different signature. This way Bob can verify
that the message sent by Alice was not modified along its way.
2. Authenticity: The message is verified using the public key of the sender. When Alice sends a
message to Bob. Bob uses the public key of Alice for verification and Alice’s public key cannot
create the same signature as Kev’s private key.
3. Message Nonrepudiation: Once the signature is generated, Alice cannot deny having signed it in
the future, unless Alice’s private key is compromised.
Suppose Alice creates a signature from the message and sends a message to Bob and a signature to
the trusted center.
 The center validates Alice’s public key and verifies messages that come from Alice.
 The center saves a copy of the message with sender identity, receiver identity, and timestamp.
 The center uses a private key to create a new signature.
 The center sends a message, a new signature, Alice’s identity, and Bob’s identity to Bob.
 Bob verifies the message using the public key of the trusted center.
In the future, if Alice denies that no message is sent from its site, the center can show a copy of the
saved message.
Conventional Signature vs Digital Signature
A document is signed to show that is approved by the user or created by the user. The signature is
proof to the recipient that this document is coming from the correct source. The signature on the
document simply means the document is authentic.
When Alice sends a message to Bob, Bob needs to check the authenticity of the message and confirm
it comes from Alice and not Kev. So Bob can ask Alice to sign the message electronically. The
electronic signature that proves the identity of Alice is also called a digital signature. Digital
Signature needs a public key system. The sender uses a private key to sign a document and the
verifier uses the public key to verify the document.
Below are the differences between conventional signatures and digital signatures.
S No. Conventional Signature Digital Signature

A conventional Signature is part of a

A digital signature is not part of a
document. For example, when a cheque is
1 document. This means the sender sends
signed the signature is present on the
two documents message and a signature.
cheque not on a separate document.

To verify digital signatures the recipient

To verify conventional signatures the
applies a verification technique to a
recipient compares the signature on the
combination of the message and the
2 document with the signature on file. So
signature to verify authenticity. So here
recipient needs to have a copy of this
a copy of the signature is not stored
signature on file for comparison.
anywhere.

There is One to One relationship

There are One to Many relationships
3 between message and signature. Every
between document and signature.
message has its own signature.

Copy of signed document can be No distinction can be made unless there

4 distinguished from the original signature is a factor of time(timestamp) on the
on file. document.

How do Digital Signatures Work?

Let’s have a look at the series of steps involved in working of digital signatures:
1. Signing the message with the private key: Digital signature is created using signing software
that creates a one-way hash function of the data to be signed. The private key of the sender is
used to encrypt the hash value generated. The encrypted hash value along with the hash
algorithm constitutes the digital signature. The sender will now send the message along with the
encrypted hash value to the receiver. The receiver can only decrypt the hash value using the
sender’s public key.
2. Verifying the message with the public key: At the receiver end, there are two steps, to
generate the hash of the message and decryption of the signature. By using the sender’s public
key, the signature can be decrypted. if the decrypted hash matches the second computed hash
value then it proves that the message hasn’t been changed since it was signed. If the two hash
values don’t match then it means that the message has been tampered with along its way.
Let’s understand the above concept using an example:
 Alice decides to send a message to Bob.
 Alice creates the hash value of the document.
 Alice uses her private key to encrypt the hash value.
 Alice sends the document along with the encrypted hash value to Bob.
 When Bob receives the message, he will use Alice’s public key to decrypt the received hash value.
 Bob will also generate the hash value of the message received.
 Bob will match the two hash values and if the values match then Bob will be sure that the
message has not been tampered with. If the values don’t match then it is confirmed that the
message has been tampered with.
Applications of Digital Signatures
Digital signatures can be used in various fields like Finance, Healthcare, etc. Below are some of the
applications of digital signatures:
 Healthcare: Digital signatures are used in healthcare to improve the efficiency of administrative
and treatment processes to strengthen data security. For example, for prescribing medicines and
admissions to hospitals. They can be used to prevent fraudulent prescriptions and medical
records.
 Legal: Digital signatures can be used to reduce the time to close contracts that require multiple
parties to validate and sign them. Due to the immutable nature of the blockchain, the contract
validity can be trusted thus allowing parties to sign the contract at their convenience.
 Government: Digital signatures are used by the government worldwide for a variety of reasons
like processing tax returns, managing contracts, verifying B2G transactions, etc.
 Financial services: Digital signatures can be used in expense reports, audits, loan agreements,
etc.
 Manufacturing: Digital signatures are used in the manufacturing industry to speed up processes
like product design, quality assurance, and marketing sales. The use of digital signatures in
Manufacturing is governed by organizations like ISO, NIST, and DMC.
 Cryptocurrencies: Digital signatures are used in cryptocurrencies to authenticate the
blockchain, and manage transaction data associated with the cryptocurrency.
 Software programs: Digital signatures are used in software programs like browsers where a
secure connection needs to be established over insecure internet.
 B2B communications and transactions: Digital signatures can be used to validate the source of
the transaction and can only be sent to only intended party without any middlemen.
Digital Signature Algorithms
Below are some of the digital signature algorithms:
 RSA-based signature schemes: RSA is an asymmetric cryptographic algorithm. It can be used
for performing a digital signature over a message. RSA signature is quite reliable, strong, and
secure.
 Rabin signature algorithm: Rabin signature algorithm was one of the first digital signature
schemes that were proposed. Hashing was introduced as an essential step in the signing process.
It has relatively less use or standardization outside IEEE P1363.
 ECDSA: Elliptic Curve Digital Signature Algorithm (ECDSA) is bitcoin’s current digital signature
scheme. This scheme uses shorter keys and has few computational requirements than the RSA
system. This scheme uses elliptic curves instead of finite fields and relies on the discrete log
problem instead of the difficulty of factoring primes for security.
 ElGamal signature scheme: ElGamal digital signature scheme is based on the algebraic
properties of modular exponentiation together with the difficulty of computing discrete
logarithms. This is rarely used in practice. Its variant developed at NSA and also known as Digital
Signature Algorithm is much more widely used.
 Schnorr signature: ECDSA lacks one important property i.e. there is no efficient way to
compress and verify signatures together. Schnorr signature schemes are provably secure with
standard cryptographic assumptions, non-malleable, and provide linearity.
 BLS signature: BLS digital signature scheme relies on pairings-based cryptography. BLS
signatures enable key and signature aggregation but they are deterministic, allow signature
aggregation across an entire block, and are approximately 50% smaller.
Benefits of Digital Signatures
Below are some of the benefits of digital signatures:
 Increase security: Digital signatures are based on the PKI technology through which the
signature becomes part of the message and cannot be modified and removed. When a digital
signature is created the time and IP location of the user get recorded in the audit trail embedded
within the message.
 Time-saving: Digital signatures simplify the time-consuming process of paper-based
transactions with manual tasks like darfting, printing, signing, scanning, and mailing. Digital
signing helps to automate the manual work and reduce the long wait to few hours.
 Timestamping: Timestamping is importacnt when timing is critical. Providing date and time of a
digital signature helps in time critical jobs like stock trading, lega; proceedings, etc.
 Cost savings: By going paperless with the use of digital signature, organizations can save money
that was perviously being specnt on the physical resources like paper, office space, manpower
hat are used to manage them.
 Workflow automation: Paper process requires anual tracking, accuracy, and coordination when
the documents needs to be signed in the particular order and at the same time the data
confidentiality needs to be protected. There are more chances of error, delays, mistakes but these
can be cut out when using a digital tool that makes the workflow standardized, consistent, and
error-free.
 Traceability: Digital signatures create an audit trail that makes internal record-keeping easier.
There are very minor chances of mistake when everything is recirded digitally.
 Legally compliant: Digital signatures are enforceable in evry developed country worldwide.
Digital signatures are generally considered the most secure type of e-signtaures aand can be used
to sign most documents.
 Satisfied end-user: Users can sign from any device, from anywhere and at their own pace
without physically visiting a branch, office, or store.
Limitations of Digital Signature
Below are some of the limitations of digital signatures:
 Theft of keys: Lost or theft of keys is one of the major drawback of digital signatures. The use of
vulnerable storage facilities is one of the other limitation.
 Additional cost: To effectively use digital signatures sender and recieever needs to buy digital
certificates and verification software at a cost.
 Need for standard: There is a strong need for a standard through which these different methods
can interact.
High and Low trust societies

A low-trust society is defined as one in which interpersonal trust is relatively low, and which do not have
shared ethical values.[1] Conversely, a high-trust society is one where interpersonal trust is relatively high, and
where ethical values are strongly shared.
Institutions and mechanisms[edit]
According to researchers, low-trust societies are typically kinship-based;[1] outcomes of low-trust societies can
include difficulty in forming and maintaining corporate structures.[2] Mechanisms and institutions that are
corrupted, dysfunctional, or absent in low-trust societies include respect for private property rights, a trusted civil
court system, democratic voting and acceptance of electoral outcomes, and voluntary tax payment. [3] Research
has identified a correlation between linear-active cultures (i.e. following a daily schedule with a single task at a
time)[4] with high-trust societies, and multi-active cultures (flexible schedules with many tasks at once, often in an
unplanned order) with low-trust cultures.[5]
Self-governance[edit]
High-trust societies display a high degree of mutual trust not imposed by outside "contractual, legal or
hierarchical regulation", but instead are based upon "prior moral consensus". [1] Much writing on the subject refers
to Francis Fukuyama's 1995 book, Trust: Social Virtues and Creation of Prosperity, in which he describes "the
ability of various peoples to organize effectively for commercial purposes without relying on blood ties or
government intervention".[6]

In the last article, we defined trust through the lens of Vitalik Buterin and
learned the factors to consider in assessing the level of degree of trust that a
protocol or application offers. We will review the trust models themselves for
this part and then apply them to Layer 2's.
For a visual reference, Vitalik shows a trust map that projects the number of
people needed to make a system work or the effort needed to make sure
everyone is acting accordingly vs the rest if they don’t, and the implications
faced* explained much more in detail below. The more green, the better.
Here is the breakdown of the Type of Trust Models to keep in mind before
looking at the Trust Map:

1of N model shown (ZK Proofs) with N/2 of N (How most blockchains work)

N of N model (No Backups) shown with the 1 of 1 model (Centralized)

1. 1 of N - As long as at least one person behaves as predicted, the system

functions. This is frequent in systems that rely on fraud proofs

2. N/2 of N - This is how most blockchains operate, with the majority of actors
(such as miners or validators) being relied upon to act honestly. However,
this paradigm has limitations since a dominating majority can jeopardize the
system

3. N of N - A dystopian model. We rely on many actors, all of whom must act

as expected. If not, then there are no backups if one fails.

4. 1 of 1 - The traditional centralized setup. We just need one person to act as

anticipated. But if they fail, everything else fails as well

5. Few of N - This sort of model works if at least a small number of N are

present and behave as needed
 6. 0 of N - This works independently without the reliance upon other actors,
for example, when you manually verify or validate a block by inspecting it
yourself

Number of actors needed to behave correctly vs the rest of the actors in the system to
prevent failure
A critical point here: All these models, apart from "0 of N", involve trust, but
they are very different from each other! Trusting one person vastly differs
from trusting anyone anywhere will act appropriately.
Also, we have to consider how the system fails if trust is violated. In a
blockchain, failures are primarily of two types - liveness failures (you
can't do what you want to temporarily) and safety failures (when
something happens that the system should have prevented).
Now let’s apply these to Layer 2 Solutions to understand it better. Layer 2
solutions have been designed to scale blockchains without compromising
their security.
They are secondary protocols built on top of a primary blockchain (Layer 1),
and they serve as an essential component in the blockchain ecosystem,
especially when it comes to scaling and interoperability.
NOTE: "Small N" below is used to refer to the set of participants of the layer
2 system itself, and "Big N" refers to the participants of the blockchain; the
assumption is always that the layer 2 protocol has a smaller community than
the blockchain itself.

Trust Models Shown With Failure Types

Trust Models Applied to Layer 2 Solutions with Violations
1. Channels

 Trust Model: 1 of 1

 Liveness: The trust model assumes that both parties participating in the
transaction will act truthfully. If the counterparty decides to act maliciously,
they might produce a liveness failure by freezing your funds briefly.

 Safety: Because the underlying Bitcoin network provides security, a

blockchain-wide 51% attack is the major safety concern.
 Example: Bitcoin Lightning Network
What are peer-to-peer (P2P) networks?
Peer-to-Peer (P2P) technology is based on the decentralization concept, which lets network participants
conduct transactions without needing any middle-man, intermediaries or central server. Peer-to-peer
technology is how Bitcoin (BTC) operates; no administrator is required to maintain track of user
transactions on the network. Instead, the peers in the network cooperate to handle deals and manage
the BTC.

Peers refer to the nodes or computers that perform the same tasks and have the same power within a
blockchain network. Blockchain is a P2P network that acts as a decentralized ledger for one or more
digital assets, which refers to a decentralized peer-to-peer system where each computer keeps a
complete copy of the ledger and verifies its authenticity with other nodes to guarantee the data is
accurate. In contrast, transactions at a bank are kept secret and are only overseen by the bank.

The security of the underlying consensus algorithms and the privacy of transactions are all closely tied
to its implementation, making the P2P network a crucial component of blockchains. However, no
common P2P protocol for blockchains has been suggested. Instead, different cryptocurrencies have
developed and adapted their own peer-to-peer protocols.

How do P2P networks work?

As mentioned, there are no central in peer-to-peer blockchain networks. Instead, all nodes (peers) are
connected to one another. A mesh network with a “flat” topology connects the network nodes and there
is no hierarchy. In a peer-to-peer network, nodes simultaneously give and consume services with
reciprocity serving as the motivation for participation, making P2P networks open, decentralized and
robust by nature.

Each node on the network must serve as both a client and a server to other nodes in a P2P network,
making it distinct from a traditional client-server setup. There is always a central server in a client-
server configuration from which the client downloads files.

On the contrary, in a decentralized setup, each node acts as a server that can download files and share
them with other nodes. A node may perform both the sharing and receiving functions concurrently,
which accounts for the P2P network’s speed, security and efficiency. The measures listed below can
help to ensure the security of your P2P networking systems:

Furthermore, in order for new peers joining the network to readily locate other peers to connect to, P2P
architecture functions best when there are many active peers in a blockchain network. It is important to
note that there are still enough peers left in the network to pick up the slack if a significant number of
peers leave.

However, there are fewer resources accessible overall when there are few peers. For instance, with a
P2P file-sharing application, a file might be downloaded more quickly if it is popular, which indicates that
many peers are sharing it.

What are the various types of peer-to-peer (P2P)

networks?
A P2P architecture can be categorized into structured, unstructured and hybrid peer-to-peer networks,
as explained below.

Structured peer-to-peer networks

In this type of network, nodes interact based on an organized structure, enabling nodes to precisely
search for files, even if the content is unavailable. However, due to an organized system, some sort of
centralization exists in structured P2P networks. Unlike unstructured peer-to-peer networks, structured
peer-to-peer networks are challenging to set up, although they provide simple data access.
Unstructured peer-to-peer networks

There is no set structure for the nodes in this kind of network, allowing network participants to join or
leave the network as they desire. Also, due to a lack of definite structure, participants converse with one
another at random. However, unstructured P2P networks require all nodes to remain active to power a
high number of transactions, mandating huge CPU power to ensure that the network runs properly.

Hybrid peer-to-peer networks

This type of P2P network mixes some P2P design aspects with the traditional client-server approach. For
example, it makes it possible to locate a node using the central server. A distributed network application
framework called the client-server architecture assigns tasks to servers and clients in the same system
that connect via a computer network or the Internet.

Benefits of P2P blockchain networks

Peer-to-peer networks offer many benefits over the traditional client-server architecture as there is no
single point of failure in a distributed network of computers. On the other hand, data may get erased if
the server goes down in a client-server model. Moreover, P2P networks may withstand attacks
reasonably well since they are decentralized and lack a centralized server. Unlike banks, blockchains
using P2P architecture cannot restrict network participants from doing a transaction.

In addition, P2P networks are cost-effective because they do not require a network operating system,
thus reducing costs. Furthermore, peer-to-peer networks are remarkably resilient to changes in peer
composition — the network can readily accommodate an increase in load if many new peers join it at
once. Also, the loss of a single peer has little effect on the network as a whole.

Various use cases of P2P blockchain networks include sharing software and games through file-sharing
networks. Cryptocurrencies also use P2P networks to allow users to conduct transactions in a
decentralized setup. Other than the Bitcoin network, Skype and BitTorrent are P2P network examples.

Limitations of P2P blockchain networks

Despite the above advantages, peer-to-peer networks are not without any cons. As there is no
centralized server, any virus or malware may get injected into all the participating nodes from the
infected one. Similarly, nodes can distribute copyrighted content as no centralized party controls the
system.

Additionally, anyone can create parallel networks called a hard fork of the blockchain if they want,
implying that the software needs to be updated to comply with the new guidelines. For instance,
following the Ethereum Merge, proof-of-work Ethereum (ETHW) was created by a Chinese miner.

P2P networks frequently have a sizable number of users who consume the resources shared by other
nodes while keeping their own resources to themselves. Such free-riding nodes are called “leechers”
that may support unethical and immoral behavior.

Is P2P crypto trading safe?

Peer-to-peer trading allows buyers and sellers to trade directly on decentralized exchanges (DEXs). P2P
cryptocurrency exchanges give users more control over prices and payment options. Nonetheless, this
freedom comes at the cost of decreased liquidity compared to traditional exchanges, restricting the
range of cryptocurrencies that may be traded at peer-to-peer marketplaces like Binance.

No involvement of the third party, zero transaction costs and flexible prices make P2P crypto trading
attractive to cryptocurrency traders. However, many nations aim to outlaw the trading and transaction
of cryptocurrencies in response to governments worldwide trying to control the cash flow surrounding
digital currencies and influence the crypto markets.

Since P2P crypto marketplaces trade on a worldwide market while remaining local, they can get around
these cryptocurrencies-related regulations. Additionally, all transactions on a peer-to-peer network are
protected by escrow smart contracts, preventing fraud against either party involved in P2P trades.

Tokens are transferred to the escrow, a third-party smart contract, before a transaction is made. Until
the necessary payment conditions are met, the escrow retains the tokens that have been deposited.
 However, the parties to the transaction must ensure that the agreed-upon good or service is provided
and that money is received.

Despite such safety measures, P2P trading is not entirely safe. For instance, using the chargeback
feature (return of money to the payer) of P2P payment platforms, scammers may request the payment
back. Therefore, conducting due diligence on P2P marketplaces may protect you against peer-to-peer
trading scams

That said, watch out for unusual behavior and avoid canceling the trade after paying because the
cryptocurrency will be freed from the escrow service and returned to the seller’s wallet. Instead,
designate the transaction as paid and use the proof of payment to claim any money back.
PEER-TO PEER TRUST MODEL IN CRYPTOGRAPHY

Peer-to-peer (P2P) trust models in cryptography are designed to facilitate secure interactions and transactions
directly between parties without the need for intermediaries. These models aim to establish trust between
peers in a decentralized manner. Here are some common elements of P2P trust models in cryptography:

1. Decentralization: P2P trust models eliminate the need for central authorities or intermediaries by allowing
participants to interact directly with each other. This decentralization ensures that control and decision-
making are distributed across the network.
2. Cryptographic Authentication: P2P trust models often rely on cryptographic techniques such as digital
signatures and public-key cryptography to authenticate the identities of participants and ensure the integrity
and confidentiality of communications.
3. Trust Metrics: P2P networks may use trust metrics or reputation systems to assess the reliability and
trustworthiness of participants. These metrics can be based on factors such as past behavior, history of
successful transactions, and endorsements from other peers.
4. Consensus Mechanisms: P2P networks require mechanisms for achieving consensus among participants to
validate transactions and maintain the integrity of the ledger. Consensus mechanisms such as Proof of Work
(PoW), Proof of Stake (PoS), or variations thereof may be employed depending on the specific requirements
of the network.
5. Incentive Mechanisms: P2P networks may incorporate incentive mechanisms such as rewards or penalties
to encourage desired behavior and discourage malicious activities. These incentives can help align the
interests of participants with the overall goals of the network.
6. Transparency: P2P trust models often prioritize transparency by making transaction records and network
rules publicly accessible and verifiable. This transparency enhances trust among participants by providing
visibility into the inner workings of the network.
7. Resilience to Attacks: P2P trust models are designed to be resilient to various types of attacks, including
Sybil attacks, double-spending attacks, and censorship attempts. This resilience is achieved through a
combination of cryptographic techniques, consensus mechanisms, and network architecture.

Overall, P2P trust models in cryptography enable secure, decentralized, and permissionless interactions
between peers, making them well-suited for applications such as cryptocurrencies, decentralized finance
(DeFi), peer-to-peer lending, and distributed file sharing.

Leviathan IN CRYPTOGRAPHY

In cryptography, "Leviathan" could refer to different things depending on context. Here are a couple of
possibilities:

1. Leviathan Encryption Algorithm: There isn't a widely recognized encryption algorithm known as
Leviathan in the field of cryptography. However, it's possible that it could be a proprietary or lesser-known
algorithm developed by a specific organization or individual.
2. Leviathan Protocol or Project: Leviathan could also be the name of a cryptographic protocol, project, or
initiative focused on security, privacy, or decentralized systems. Cryptographic protocols often have names
that evoke strength, security, or mythical creatures, so Leviathan might fit into this category.

Without more context, it's challenging to provide a specific explanation of what Leviathan refers to in the
context of cryptography. If you have additional details or context, feel free to share them, and I can provide a
more tailored response.
Intermediary TYPES IN CRYPTOGRAPHY

In cryptography, intermediaries are entities or components that facilitate communication, transactions, or

interactions between parties while preserving security and privacy. Here are some common types of
intermediaries in cryptography:

1. Certificate Authorities (CAs): CAs are trusted third parties that issue digital certificates used to verify the
authenticity of public keys. They play a crucial role in establishing trust in public key infrastructure (PKI) by
verifying the identity of certificate holders before issuing certificates.
2. Key Management Services: Key management services provide infrastructure and tools for securely
generating, storing, and distributing cryptographic keys. They help ensure the confidentiality, integrity, and
availability of keys used in cryptographic operations.
3. Secure Multi-Party Computation (SMPC) Providers: SMPC providers enable multiple parties to jointly
compute a function over their private inputs without revealing those inputs to each other. They facilitate
secure collaboration and data analysis while preserving privacy and confidentiality.
4. Secure Hardware Modules: Secure hardware modules, such as hardware security modules (HSMs) or
trusted execution environments (TEEs), provide a secure environment for performing cryptographic
operations and storing sensitive keys. They protect against various attacks, including tampering and side-
channel attacks.
5. Oracles: Oracles are trusted data sources that provide external information to smart contracts or
decentralized applications (DApps) on blockchain networks. They bridge the gap between blockchains and
the real world by supplying off-chain data in a secure and reliable manner.
6. Trusted Third Parties (TTPs): TTPs are entities that act as intermediaries in cryptographic protocols or
systems to facilitate trust between parties. They may provide services such as escrow, dispute resolution, or
identity verification in online transactions.
7. Privacy Enhancing Technologies (PETs): PETs are cryptographic techniques and tools designed to
enhance privacy and anonymity in digital communications and transactions. Examples include zero-
knowledge proofs, mix networks, and anonymous credentials.
8. Tokenization Services: Tokenization services convert sensitive data into tokens, which are non-sensitive
representations that can be used in cryptographic operations without revealing the original data. Tokenization
helps protect sensitive information such as payment card data and personal identifiers.

These are just a few examples of intermediaries in cryptography. Depending on the specific application or
context, there may be other types of intermediaries involved in cryptographic systems.