Cryptography is the practice and study of techniques for secure communication in the presence of third parties. Cryptography involves creating written or generated codes that can only be read if you have a secret key, or password. It has long been used to protect sensitive information such as military secrets and financial data, but it’s also increasingly being used in digital currency transactions.
Cryptography plays an important role in cryptocurrency networks like Bitcoin because it helps users store their coins securely, verify payments from other users, keep track of balances on the blockchain ledger, and prevent double spending (sending the same coin multiple times). In order for these crucial tasks to take place safely without interference form malicious actors like hackers or ransomware attackers, cryptography must play a critical role by encrypting user data so no one else can access it without permission.
The most common cryptographic algorithm used with cryptocurrencies is called SHA-256 (Secure Hash Algorithm 256), which was developed by the National Security Agency (NSA) of USA as part of its Digital Signature Algorithm initiative back in 1993. This algorithm uses mathematical equations to generate unique hashes – strings of numbers that identify specific records within a database – based on inputted text or files; when applied to cryptocurrency systems this means each transaction generates its own unique hash code that identifies it among all others within its network while keeping sender and receiver identities confidential through encryption processes powered by public/private keys pairs associated with wallet addresses linked to those accounts involved in any given transaction..
In short: Cryptography is an essential element behind every successful cryptocurrency system due to its ability both ensure privacy between transacting parties using public/private keys pairings along with verifying integrity via cryptographically generated hashes tied into individualized records stored onto distributed ledgers known as blockchains .
