How Does Cryptography Make Digital Currency Secure? | Cryptocurrency White Paper Award Announced

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How Does Cryptography Make Digital Currency Secure? | Cryptocurrency White Paper Award Announced

Since digital currency is not physical, how is it made secure? That’s where cryptography comes in. Cryptography is the mechanism that allows digital data to be encrypted and then decoded. This method produces a secret encoded message and you need a key to access it. These encryption keys form the basis for cryptocurrency security.

It is that research that becomes the white paper for cryptocurrency.

Coinbase’s Applied Researcher, Yehuda Lindell, has won the prestigious “Test-of-Time” award for 2022 from the International Association of Cryptologic Research (IACR). The “Test-of-Time” award recognizes papers published 15 years ago that have had a lasting impact on the field of cryptography. Yehuda’s pioneering work was published a year before another important paper you may be familiar with: “Bitcoin: A Peer-to-Peer Electronic Cash System”.

His 2007 paper, “An Efficient Protocol for Secure Two-Party Computation in the Presence of Malicious Adversaries,” was the first to outline a two-party multi-party computation (MPC) protocol that was efficient enough to be implemented. In layman’s terms, secure two-party computation allows two “people” to solve a problem while keeping critical information private. For example, it solves the classic millionaires’ problem by allowing two people to understand who has more money without revealing their respective net worths. Yehuda’s work laid the foundation for future practical constructions.

Why cryptography is critical

Beyond their shared etymology related to something “hidden” or “secret”, cryptocurrency and cryptography are very intertwined. Cryptography’s mathematical and technological innovations underpin the entire crypto industry. The Bitcoin white paper makes this clear by introducing a cryptographic protocol in place of a trusted third party to validate transactions. This shift makes decentralization possible by “allowing any two willing parties to transact directly.”

Cryptography is essential to enabling transactions that are anonymous, secure, and “trustless.” The final point is the least obvious and perhaps most important. You don’t need a bank, credit card company, government, or other third-party intermediary since cryptographic tools such as public-private key encryption provide secure, direct confirmation.

Coinbase invests in fundamental research

Coinbase cares deeply about the security and reliability of their systems and the crypto industry as a whole. Investing in fundamental research is a core part of their mission to increase economic freedom in the world. They are honored to have Yehuda on their team and to support research that advances their mission.

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