What is Encryption: A Beginner’s Guide to Security

4 mn read

Encryption is one of the most common terms that we get to hear in the blockchain industry. When the data on the blockchain is encrypted using multiple encryption technologies, it becomes important for the users to understand how they function.

Encryption not only secures the data of the end user but also acts as the first line of defense for data-centric organizations. In cryptocurrencies, encryption plays an important role in securing the DeFi wallet, on-chain hashes, and other transactional details that must be secured from any external intrusion.

In this blog of Coin Gabbar, we are going to explore encryption and its types in detail. We will also try to elaborate on the relevant use cases of encryption in our daily lives.

What is Encryption?

Encryption is a method of converting readable data into an unreadable or incomprehensible string of characters that can only be reverted back to its original state using a private key. This private key is known only to the participants of the communication and could not be interpreted without the key.

The encryption key is a mathematical or alphanumeric expression stored in a file that one worked upon by an encryption decoder can decode an encrypted file. The encryption key is critical for the security of the file as it can decode the file for anyone having the encryption key.

However, the randomness of a long series of alphanumeric characters makes it impossible to guess the encryption keys even by using the fastest computers on the planet.

How Does Encryption Work?

In this segment of the blog, we are going to get deeper into the functioning of encryption and cryptography. Cryptography is the process of ciphering text or any form of data into incomprehensible or meaningless information that can only make sense when you decrypt the data using its specified keys. These keys are generated at the time of encryption and must be secured to decrypt the data at the right time.

Cryptography is the process of ciphering the data while encryption is the method of packing this information using a private key. Encryption can also be specified into the following categories.

  • Symmetric Encryption

  • Asymmetric Encryption

Symmetric Encryption is an older encryption method using which a file is encrypted and decrypted with the same key. This method is comparatively less secure than the modern encryption method but it is one of the fastest encryption methods to secure large chunks of data. This enables a quick deciphering and streamlined flow of encryption.

On the other hand, the asymmetric encryption method is relatively new. In asymmetric encryption, encryption keys are made public while the decryption keys are kept secret. Asymmetric encryption requires two sets of keys to decrypt the data which makes it more secure but time-consuming. Asymmetric encryption, being more secure, is used for more significant transactions such as blockchain and other encrypted financial transactions.  

Types of Encryption Algorithms

Encryption algorithms are digital programs utilized for encrypting and decrypting data using a specified method. Encryption algorithms ensure that the digital data of the users remain private and could not be accessed without their approval. There are multiple encryption algorithms that are used all over the world and in this part of the blog, we are going to share brief introductions to some of the most common encryption methods used today.


DES stands for data encryption standard algorithm and 3DES is just the three repetitions of the same encryption to provide 3x security to the data. In 3DES, data is first encrypted then decrypted, and then encrypted again using a single encryption key. 3DES uses an asymmetric method for encryption and is one of the fastest encryption algorithms which are in use.


AES or Advanced Encryption Standard is developed by the US government for securing its sensitive information and communications. AES is one of the safest methods to encrypt your data and uses 128, 192, and 256-bit forms of encryption with 256 being the most secure of all. As the bits in the AES increase, the complexity of the encryption increases as well, making it stronger in terms of security.

AES is an asymmetric encryption method and requires two keys to decrypt the data. The AES encryption algorithm is evaluated every five years to ensure that it is still safe to use for sensitive communication.


SHA or Secure Hash Algorithm is based on the principle of creating hashes from keys and scrambling the data from which it is practically impossible to retrieve the data back. The only thing that can decrypt the data to its original form is its private key.

SHA-256 is used for verifying transactions in cryptocurrencies because of its highly reliable security. Bitcoin, Peercoin, Litecoin Cash, and Zetacoin are some of the most famous cryptocurrencies based on the SHA-256 encryption algorithm for generating their crypto keys.

Closing Remarks

Security and privacy were the sole reasons behind the development of blockchain technology. As more people are getting connected to the internet in this world and accessing the cryptos, it becomes important to provide them with a secure environment to operate. Indisputable credibility in financial transactions and complete privacy of personal data are going to become a major demand in the future. Encryption and cryptography offer a feasible solution to this problem and could become a mandate in the upcoming times.

We hope that we were able to provide you with all the information required to understand the basics of encryption methods. What according to you is the future of encryption in cryptocurrencies and other digital currencies? Share your views in the comments down below.

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