Investing In Cryptocurrency Basic

Hello friends, in today’s article, we see the Investing in Cryptocurrency basic. Before investing in cryptocurrency, we should know how it works. Peoples say cryptocurrency is a secure currency no one hack it, tract it. so let’s see Cryptocurrency’s basic idea.

Warren Buffett Rules on Investing

Cryptocurrency Basic:-

Cryptocurrency all depends on the most secure Technology it’s called Blockchain technology.

If you want to understand Blockchain Technology and Cryptocurrency, before that we should know about the Cryptography technique.

In this article, we are talking about Cryptography, and how it’s used in Blockchain technology.

so let’s start.

Cryptography:-Investing In Cryptocurrency Basic

Cryptography means, the hidden writing or message.

if you want to send a private message, then you have to write in code words. Because another third person can’t understand your private message. Only those person know, one who send the message and one who receives the message. just like, some of the army missions hidden confidential messages.

Cryptography is widely used in world war II, German send messages in cryptography to their senior officer, because British or American soldiers don’t understand them. (Investing In Cryptocurrency Basic)

now let’s understand the new computer century cryptography language i.e. Blockchain Technolgy.

Blockchain Technology:-

To understand blockchain technology, we should know the three basic concepts.

1) Encryption/Decryption:-

Encryption means, the original message is converted into ciphertext with the help of a computer is known as Encryption.

Decryption means the ciphertext is converted to the original message is called Decryption.

For this Encryption and decryption, we need the keys. let’s understand the key concept in blockchain technology.

let’s understand the keys concept with the help of examples

Example:- The Original message is HELLO, let’s say, it is an encrypted key, which means One Letter next to the Original message (HELLO), so for the HELLO message, we use IFMMP. ( H=I, E= F, L=M, O=P)

so we are taking the next letter of words like secret, so I send IFMMP.

so this message is don’t understand by a third person. I know, I send Hello, and that person receives, they also knew about the key ( next letter of the word), then they can decrypt the message. (Investing In Cryptocurrency Basic)

so those people receive the message, they know the key then they decrypt IFMMP into HELLO words.

The process of encryption and decryption are two types, symmetric and Asymmetric

Symmetric:-

In Symmetric, we use the same key for encryption and decryption. The above example of hello comes in Symmetric cryptography.

the problem with symmetric cryptography is most know the key to decrypt the message by Receiver. so you have to tell them the key on the phone or meeting personally.

And in this time, other third-person, can listen to your key and understand your private message by using the key.

To solve this problem, we use Asymmetric cryptography.

Asymmetric:-

In Asymmetric, we use the different keys for encryption and decryption, but they are mathematically linked. just like our Nikes shoes. (Investing In Cryptocurrency Basic)

In this key pair, one key is used for encryption and another key is used for decryption. so these two keys have their own name

Public Key:- this key, you can share with anyone (public).

Private Key:- this key, you can not share with people, you keep yourself as a password.

By using your public key people encrypt the message and send you. and you know the how-to decrypt message, with your private key.

People can send you a public key without any hesitation, and you can send a message by using their public key, and they see the message by decryption with their private key.

In Blockchain technology, Asymmetric cryptography is widely used. this Asymmetric is used in two places.

In the first place: for your account, number/username/address

those are your public key is your account number.

In second place:- If you want to send Bitcoin or any cryptocurrency, you have to authorize that transaction by using your private key. (Investing In Cryptocurrency Basic)

The public key is your account number

The private key is your password.

So anyone can send you digital money ( cryptocurrency), but from your account, no one takes money until your private key is available to another person.

let’s see the second concept of cryptocurrency.

Hash function:-

to understand the Hash function, let’s take the math function.

A hash function is like, in math we see Addition, subtract, multiply, divide function, just like that is the Hash Function.

example:- Add function:- 3 + 2 is an input, and the result 5 is output.

just like, Subtract function:- the input 3 – 2, then output is 1.

some as the add and subtract function.

A hash function is also working, like that, by following some mathematical function.

By providing Input, give the output.

Hash Function has two types.

Basic Hash Function
Cryptographic Hash Function.

In blockchain technology, we use the cryptographic hash function. so let’s understand the cryptographic hash function.

Cryptographic Hash Functions, are those in that you can give any input, but their output is always Unique like a fingerprint. (Investing In Cryptocurrency Basic)

Now let’s see the characteristic of the cryptographic hash function.

Characteristics of Cryptographic Hash function:-

Identical output for identical input:- By giving any input, the output is always the same for example, let’s say the input is HELLO, and output is ABC. Means someone says hello, their always output is ABC. So ABC is unique output, that only comes for Hello Input.
Hard to find two inputs with the same output
Output is unpredictable even when input changed slightly.
by providing output for any kind of Input.
You can’t compare input from the output:- one-way function, means, if you know, the output is V35, so you can’t guess the input.

Hash Function, give those output, so that output, called as Hash Value Fingerprint or digest.

now, let’s see the uses of hash Function in Blockchain technology.

Uses of Hash Function:-

the hash function is used to compare two data without checking content piece by piece:- Two things are the same without knowing what it is if two documents have every 10 pates so we don’t need to read line by line in the hash function. I just take the hash of both documents, if with documents has hash value sone, means their inputs are same ( nothing more difference, if they have the difference, then hash value also be different.)
The hash function is used to determine, whether data was changed by someone:- if some disrupt the data, if someone disrupts, then new data hash value is different from the first one. (Investing In Cryptocurrency Basic)

now let’s see how this hash function where used in blockchain technology.

so blockchain technology is a type of register, in them, all transaction is recorded. so it is necessary to know if someone disrupts the data. so for this hash function is very important.

To store transaction data in a change sensitive manner
to incur computational costs for adding/changing data:- if for hacker/thief want to change the date, it may be hard or expensive for the hash function used. In the blockchain, any new data adding or changing Old data, we have to ( solve the Hash puzzle.) so to solve that puzzle is very expensive.
use as a fingerprint or transaction data:- Hash function used in blockchain to found out hash Value of Transaction data to a minimum and manageable, because, whatever size of input hash function gives output is fixed length, and that is manageable as compared to input data that may be big.

now let’s see the third important concept of cryptocurrency.

3) Digital Signature:-

The digital signature is made by using our private key when you transfer cryptocurrency from your account to another’s account.

signature are two types, one is a handwritten signature, that written by hand.

but for online work, we create Electronic signatures.

There are three types of Electronic Signatures.

That signature we write on paper and upload on the computer ( this must be used in filling exam form, any scheme form)
Write down the full name, they are like declaration signs, in that we write our full name.
Electronic Signature is a Digital signature

so in blockchain technology, the forms are in ciphertext, so by seeing them, we can not understand.

now, let’s see, What is a digital signature, and why this is required in blockchain technology. (Investing In Cryptocurrency Basic)

Except for digital signature, other signatures have two problems, that’ why we need a digital signature.

Documents can tamper after signature:- The first problem is, after signing you, your documents can be used for wrong purposes. e.g. If you sign the check and somebody edits that sign, or add one more zero on the check, or number change, these things may be happening.
The signature can be copied to other documents.

so digital signature solves this problem.

A digital signature is only used for those specific documents and not for other documents.

let’s understand how it’s work

For example, Suppose, you want to send content or any documents, so you have to sign digitally. so first you pass this message in the hash function, then the hash value generates. so this hash value, you encrypt with the private key, then ciphertext come.

So this ciphertext is your digital signature.

you encrypt the message with the help of a private key and hash function which are your digital skill. so now, you can share this message in the open air, and your ciphertext ( digital signature) is also sent in the open air.

so now, let’s see how people, verify that is your message and signature.

First, they take your message and pass through the hash function then come hash value.

Second, they take your digital signature, they put the public key, then come to the original things (first)

so what is original things is the hash value of that message.

the digital signature hash value comes by using the public key and message hash value, if both are the same, then verify the signature. (Investing In Cryptocurrency Basic)

Digital signature told the sign of this thing is written by the account holder.

How they know,

the digital signature, they are in ciphertext if they come some by using a public key to passible decrypt. This means public keys corresponding private key, have account holder so that only person make the digital signature.

so the question comes, how do they verify this,

you take the Hash value of, the original message those comes in the air, then you decrypt the digital signature by using a public key, then the hash value comes.

so both are matching, so this is the original message by a private key, which means the account holder wrote this sign. means they authorize this document.

By using a hash function and private key, we can find out that, naturally owner is signed, and the other is is the content the owner signed.

so in blockchain technology, the digital signature is used in two places.

a) Transaction sign:- means if you want to transfer cryptocurrency from your account to another account, for that you use digital sign. (Investing In Cryptocurrency Basic)

b) Transaction Verification:- the minor(computer guys) verify your transaction. they take as like, see the hash value of the original message and digital signature hash value, both are same then verify your transaction.

so these are the basics of blockchain technology used in cryptocurrency.

In the next article, we see the different types of cryptocurrencies.

Hello friends, if you want to invest in cryptocurrency, you should must know above concept.

Read Investing Articles,