Sunday, May 29, 2022

Does Bitcoin encrypt transactions?

 *It is important to note that the core bitcoin network/ledger does not use any encryption. It is all hashing as explained here - 

But each and every transaction is digitally signed by a user (or wallet). 
Hence a bitcoin network uses digital signatures and as we know a digital signature is nothing but an encrypted hash of the data. 

You can digitally sign any data in the following way (creating an encrypted hash of the data)
  • Hash the data using SHA-256.
  • Encrypt the generated hash using your private key. 
  • Package this encrypted hash and your public key together. 
The public key is part of the digital signature, whereas the private key is securely stored in a digital wallet (never to be shared with anyone). 

In the bitcoin network, this digital signature is created using the Elliptic Curve Digital Signature Algorithm (ECDS). ECC encryption is not used! - Many folks get confused by this :)

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