Bitcoin (like Ethereum and many other cryptocurrencies) uses a technology called public-private key encryption. This allows them to be “suspicious” and allows secure transactions between unknown people without a “trusted” intermediary, such as a bank or PayPal, in between. The Bitcoin network and database themselves don't use any type of encryption. As an open and distributed database, the blockchain doesn't need to encrypt data.
All the data that is transmitted between Bitcoin nodes is not encrypted to allow totally unknown people to interact through the Bitcoin network. Cryptocurrencies are kept secure by relying on modern methods of asymmetric encryption and the secure nature of transactions on a blockchain.
Cryptocurrency
holders use private keys to verify that they own their cryptocurrency. Transactions are protected with hashing and blockchain encryption techniques.For example, wallets and similar software technically handle all bitcoins equally, none is different from another. Bitcoin Core is a free and open source software that serves as a bitcoin node (the whole of which forms the bitcoin network) and provides a bitcoin wallet that fully verifies payments. It also provides access to testnet, a global test environment that mimics the main bitcoin network using an alternative blockchain in which worthless test bitcoins are used. Encryption is the process of converting data into a secret and incomprehensible code, so that only interested parties can understand the information.
Shiller writes that bitcoin has the potential as a unit of account to measure the relative value of assets, as is the case with the Chilean Development Unit, but that Bitcoin in its current form. This is the same encryption algorithm used by the NSA for its classified information, and AES is considered extremely secure. To decrypt a Bitcoin Core wallet, the user must enter their password, which is used as a decryption key. In asymmetric or public key systems, the encryption key is publicly available, but only the authorized holder of the private decryption key can access the decoded plain text.
To securely store private keys, most Bitcoin wallets encrypt your data using a variety of encryption schemes. Normal operation was restored when most of the network went to version 0.7 of the bitcoin software, selecting the version compatible with previous versions of the blockchain. A wallet is more correctly defined as something that stores the digital credentials of your bitcoin stocks and allows you to access them (and spend them). This allows bitcoin software to determine when a particular bitcoin was spent, which is necessary to avoid double spending.
In modern cryptography, encryption generally involves converting legible plain text into ciphertext (encrypted data that cannot be read) with the use of an encryption algorithm or cipher. A conventional ledger records the transfers of actual banknotes or promissory notes that exist apart from it, but as a digital ledger, bitcoins only exist by virtue of the blockchain; they are represented by the unspent results of transactions. While the Bitcoin network treats each bitcoin the same way, thus establishing the basic level of fungibility, the applications and people who use the network are free to violate that principle.
