Cryptocurrency or Crypto for short which is the renowned name has given a new perspective to the world. Its impact and evolution are similar to the initial currency the world ever recognized and utilized, which is Barter. Today’s fiat accepted and utilized in all countries originated from barter. Likewise, Crypto’s mechanism and blockchain technology was birthed from “Cryptography”. Cryptography is the study of secure communications techniques that allow only the sender and intended recipient of a message to view its contents. The term is derived from the Greek word kryptos, which means hidden. It is closely associated with encryption, which is the act of scrambling ordinary text into what’s known as ciphertext and then back again upon arrival.
In addition, cryptography also covers the obfuscation of information in images using techniques such as microdots or merging. Ancient Egyptians were known to use these methods in complex hieroglyphics, and Roman Emperor Julius Caesar is credited with using one of the first modern ciphers. With this knowledge in mind, one begins to ponder questions such as how old or ancient is cryptography today?
The Ancient Roots of Cryptography
Cryptography is dated back to the primitive cryptographic techniques era which existed in ancient times, and most early civilizations appear to have used cryptography to some degree. The usage of these cryptographic services was dominant in both ancient Egyptian and Mesopotamian writings. The earliest known example of this type of cryptography was found in the tomb of an Egyptian noble named Khnumhotep II, who lived approximately 3,900 years ago. The purpose of symbol replacement in the Knhumhotep inscription was not to conceal information but to enhance its linguistic appeal. The earliest known example of cryptography being used to protect sensitive information occurred around 3,500 years ago when a Mesopotamian scribe employed cryptography to conceal a formula for pottery glaze, which was used on clay tablets. In a nutshell, it is safe to say cryptography is over 3,500 years old. The crypto we are all aware of now has gone through the evolution cycle and will continue to evolve. These insights have inspired and ignited new sets of questions such as in what manner did cryptography birth cryptocurrency?
Cryptography Modalities
When transmitting electronic data, the most common use of cryptography is to encrypt and decrypt email and other plain-text messages. The simplest method uses the symmetric or “secret key” system.
There are three (3) types of cryptography, which will be briefly explained below:
1. Symmetric Key Cryptography: It is an encryption system where the sender and receiver of a message use a single common key to encrypt and decrypt messages. Symmetric Key Systems are faster and simpler but the problem is that sender and receiver have to somehow exchange keys in a secure manner. The most popular symmetric key cryptography system is Data Encryption System (DES).
2. Hash Functions: These are methods used to handle the transformation of any given key or a string of characters into another value. Many operating systems use hash functions to encrypt passwords.
3. Asymmetric Key Cryptography: In this cryptography, a public key is used for encryption and a private key is used for decryption. The Public key and Private Key are different. Even if the public key is known by everyone the intended receiver can only decode it with the private key
Applications of Cryptography
Computer passwords
1. Digital Currencies
2. Secure web browsing
3. Electronic Signatures
4. Authentication
5. Cryptocurrencies
6. End-to-end encryption
The next line of thought would be what evolutions have taken place in the crypto space or industry in the modern day. Are they noteworthy and integral in the crypto market operations?
Cryptocurrency Evolution in the Modern Day
From its inception as a proposed research project in 1991 by Stuart Haber and W. Scott Stornetta, the blockchain concept predated its first widespread application in use: Bitcoin, in 2009. Over the years, the use of blockchains has exponentially progressed via the creation of various cryptocurrencies, decentralized finance (DeFi) applications, nonfungible tokens (NFTs), and smart contracts.
Distributed networks eliminate the need for a central authority to keep a check against manipulation. DeFi aims to build an open-source, permissionless, and transparent financial service ecosystem. The decentralized financial system offers services, including borrowing, yield farming, crypto lending, asset storage, and more. This was the opportunity identified by entrepreneurs and it is the norm of crypto transactions in the modern day. Ethereum also enables users to set up and use smart contracts, which are computer programs that automate agreements. The idea is that Ethereum would provide the tools to replicate the traditional financial ecosystem. That encompasses cryptocurrency trading, lending, borrowing, insurance, payments, prediction markets, launchpads, derivatives, marketplaces, and even play-to-earn (P2E) games.
Case scenario of a Working dApp
User A wants to become a liquidity provider in order to generate yields — annualized interest rate, typically expressed as APY (annual percentage yield). To do so, user A adds tokens into liquidity pools, which are just smart contracts that collect and issue cryptocurrencies.
“A liquidity pool is a collection of digital assets accumulated to enable trading on a decentralized exchange (DEX).”
User B wants to exchange one cryptocurrency for another. To do so, user B taps into a liquidity pool contributed by user A. When user B does this, user A gets a cut on the transaction. With these operations, user A and user B create a decentralized ecosystem without actually interacting with each other. Tapping into smart contracts on either side of the equation (supply and demand) in a permission less manner. The cryptocurrency industry will experience more evolution and new technologies for easier and smart operations in the nearest future. In view of the high potential and improved technology, the next set question is how do I operate safely in the crypto space?
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