Cryptography in Blockchain: Top Types and Algorithms You Must Know!

Cryptography in blockchain plays a crucial role in ensuring the security and integrity of transactions within the network. It involves techniques like encryption, hashing, and digital signatures to protect data from tampering and unauthorized access. 

Various cryptographic algorithms, including public-key cryptography and hashing functions, are used to secure blockchain systems and promote trustless transactions.

In this blog, we’ll explore the types of cryptography used in blockchain and the key algorithms that keep networks secure and decentralized.     

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What is Cryptography in Blockchain?

Cryptography has shaped the course of human history. The earliest known use of cryptography dates back to 1900 BCE, during the Old Kingdom of Egypt, where non-standard hieroglyphs protected secret messages. 

The term itself stems from the Greek words kryptós, meaning "hidden" or "secret," and graphein, meaning "to write." Even then, it was vital for safeguarding sensitive information.

Today, cryptography serves as the cornerstone of digital security. It powers encryption for emails, secures financial transactions, and forms the backbone of cryptographic systems. By leveraging cryptography algorithms, modern security protocols shield society from cyber security threats while ensuring trust in a world dominated by data.

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Features of Cryptography

Cryptography algorithms offer multiple robust features that protect data and foster trust in digital ecosystems like blockchain. Below are key features explained with practical relevance.

• Confidentiality: Cryptography ensures that only the intended recipient can read your data. For instance, encrypted online banking transactions prevent unauthorized access.
• Integrity: It safeguards your data from tampering. Digital signatures in cryptography algorithms confirm that no one has altered your document or blockchain transaction.
• Non-repudiation: Once you send a secure message or sign a transaction, cryptography ensures you can’t deny it. Blockchain systems use this to hold parties accountable.
• Authentication: Cryptography verifies identities to confirm that the sender is genuine. Passwords and multi-factor authentication are everyday examples of this feature.
• Interoperability: Cryptographic systems work seamlessly across platforms. For example, secure file-sharing between cloud systems uses consistent cryptography algorithms.
• Adaptability: Cryptography evolves to counter emerging cyber threats. Blockchain, for example, adapts to new cryptographic methods to maintain robust security.

Also Read: What is CIA Cybersecurity: Key Components, Importance, and Use Cases

Types of Cryptography

Cryptography secures communication by protecting data through various encryption methods. In blockchain, three main types of cryptography play crucial roles:

1. Symmetric Key Cryptography

Symmetric cryptography uses a single key for both encryption and decryption. It's fast and efficient for handling large data volumes but requires secure key sharing.

Key Features:

• Single shared key: Algorithms like AES use the same key to encrypt and decrypt data. Ideal for high-speed needs, such as encrypting databases.
• High performance: Suitable for real-time protection like video streaming.
• Simple but risky: Easier to implement but vulnerable if the key is compromised.

Example: The Indian Railways encrypts passenger data using AES, ensuring real-time access while maintaining security across distributed ticketing systems. A shared key encrypts the database; compromised key access could expose entire records, making secure key exchange protocols essential.

2. Asymmetric Key Cryptography

This method uses two keys: a public key to encrypt and a private key to decrypt. It’s widely used in blockchain to enable secure, verifiable communication.

Key Features:

• Public-private key pair: Common in RSA and used in blockchain wallets for verifying ownership.
• Enhanced security: The private key stays confidential even if the public key is exposed.
• Slower speed: Processes smaller data sets but provides strong protection.
• Core to blockchain: Enables digital signatures and identity verification.

Example: RBI-backed platforms use asymmetric cryptography for secure digital signatures in interbank communications via public-private key infrastructure. A sender encrypts data with the bank's public key; only the recipient's private key can decrypt and verify the message.

3. Hash Functions

Hash functions convert any input into a fixed-length string and are essential for data integrity in blockchain. They are one-way, meaning the original data can't be retrieved from the hash.

Key Features:

• One-way encryption: Data can't be reversed, e.g., SHA-256 Algorithm in Cryptography.
• Fixed output: Output size remains the same regardless of input.
• Avalanche effect: Small input changes result in vastly different hashes.
• Blockchain role: Links blocks into immutable chains, securing transactions.

Example: NPCI uses SHA-256 to hash UPI transaction data, ensuring tamper-proof logs across financial systems. Even a minor data change alters the hash entirely, preserving transaction integrity in real-time payment validation.

Also Read: What Makes a Blockchain Network Immutable? Immutability Explained

Having understood cryptography, let's see how it works in blockchain to secure data and transactions.

How Does Cryptography Work in Blockchain?

Cryptography is essential to blockchain technology, ensuring data security, trust, and transparency. At the core of blockchain are cryptographic hash functions, which convert any input into a fixed-length output. This makes it nearly impossible to reverse-engineer the original data, ensuring the integrity of transactions.

Each block in the blockchain is linked through unique digital fingerprints generated by these cryptographic hash functions, maintaining the system's trustworthiness and consistency. When data is recorded in a blockchain, these cryptographic methods ensure that it remains tamper-proof.

Key properties of cryptographic hash functions include:

• Deterministic Output: The same input always produces the same hash, ensuring consistent and predictable data representation across the blockchain.
• Pre-image Resistance: It’s computationally infeasible to reverse a hash back to its original input, ensuring that sensitive data, like transaction details, remains secure.
• Avalanche Effect: Even the smallest change in the input produces a significantly different hash, making any tampering immediately detectable.
• Collision Resistance: Different inputs will never generate the same hash, ensuring each block in the blockchain is unique and preventing duplication of data.

Also Read: Understanding Blockchain Architecture in 2025: Key Concepts, Benefits, Applications, and More

Now that we understand how cryptography is used in blockchain, let's take a closer look at cryptographic algorithms that power these systems.

What Are Cryptography Algorithms?

Cryptography algorithms are the invisible threads holding the digital world together. These mathematical methods encrypt and decrypt data, ensuring that sensitive information stays safe from prying eyes. 

From securing your personal emails to protecting financial transactions, cryptography algorithms play a critical role in modern communication. Below are the key purposes of cryptography algorithms, explained with real-world relevance:

• Confidentiality: Cryptography algorithms encrypt data so only authorized parties can access it. For instance, blockchain wallets use encryption to protect your private keys.
• Integrity: They ensure your data remains unaltered. Cryptographic hash functions in blockchain confirm that a transaction hasn’t been tampered with.
• Authentication: These algorithms verify identities, ensuring trust in digital exchanges. Digital certificates used in blockchain platforms authenticate users and devices.

Also Read: Top Blockchain Development Tools in 2025 Every Developer Must Know!

Explore the core types of cryptographic algorithms that form the backbone of blockchain security and data integrity.

What Are Different Types of Cryptographic Algorithms Used in Blockchain?

Cryptographic algorithms form the backbone of secure communication in a world where data breaches and cyberattacks are increasingly common. These algorithms employ mathematical principles to protect sensitive information, ensuring privacy, integrity, and authentication. 

Cryptography is essential for safeguarding decentralized systems and facilitating secure transactions.

Below are some of the most widely used cryptographic algorithms that drive digital security and blockchain innovation.

1. Advanced Encryption Standard (AES)

The Advanced Encryption Standard (AES) is one of the most secure encryption methods in the world. Widely adopted by governments, corporations, and blockchain platforms, AES encrypts data using symmetric keys, ensuring confidentiality without compromising performance.

To understand AES better, here are its defining characteristics.

• Many key sizes: AES supports 128, 192, or 256-bit keys, allowing flexible levels of encryption depending on your needs.
• Security: It withstands brute-force attacks, making it one of the strongest cryptography algorithms.
• Versatile: AES encrypts everything from small files to large blockchain databases seamlessly.
• Wide applications: Its use spans from securing financial data to encrypting messages in cryptography in blockchain.

Also Read: What is a Zero-Day Attack? – Definition and Explanation

2. Data Encryption Standard (DES)

The Data Encryption Standard (DES) was a revolutionary symmetric key algorithm in its time. Though gradually replaced by more advanced methods, DES still serves as a foundation for modern cryptography. Its simplicity makes it a popular choice for educational purposes and low-security applications.

To explore DES in depth, here are its notable characteristics.

• Same symmetric key: DES uses a single key for both encryption and decryption, streamlining the process.
• Easier implementation: Its straightforward design simplifies coding and execution.
• Cipher technique: It encrypts data in fixed-size blocks, improving speed for small datasets.
• Building block: DES inspired later algorithms like Triple DES, demonstrating its foundational impact on cryptography.

3. RSA Algorithm (Rivest, Shamir, Adleman Algorithm)

The RSA algorithm revolutionized cryptography with its use of asymmetric keys. By pairing a public key cryptography with a private key, RSA ensures data security and enables digital signatures, making it indispensable for cryptography in blockchain and other secure platforms.

Below are the key characteristics that define RSA.

• Security: It relies on the computational difficulty of factoring large prime numbers, making it highly secure.
• Fast speed: RSA efficiently encrypts small data packets, ideal for verifying blockchain transactions.
• Different keys: Unlike symmetric algorithms, RSA uses separate keys for encryption and decryption, enhancing confidentiality.
• Key exchange: It securely exchanges encryption keys between users, enabling safe communication.

4. Secure Hash Algorithm (SHA)

The Secure Hash Algorithm (SHA) is vital for ensuring data integrity. It converts input data into a fixed-size hash value, making it ideal for blockchain applications. Cryptography algorithms like SHA verify data blocks and transactions, ensuring they remain unchanged.

Here are the defining characteristics of SHA.

• Security: SHA protects against collisions, ensuring that no two inputs produce the same hash.
• One-way hashing in data structure: Data encrypted with SHA cannot be decrypted, adding a layer of security.
• Avalanche effect: Even a slight change in input drastically changes the output hash, safeguarding data integrity.
• Variable input length and fixed output length: SHA processes data of any size but outputs consistent, fixed-length hashes for reliability.

Also Read: Step-by-Step Guide: How to Become a Blockchain Developer in India

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Now explore the advantages and drawbacks of cryptography in blockchain, impacting its security, performance, and overall functionality.

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Benefits and Limitations of Cryptography in Blockchain

Cryptography is the backbone of blockchain security. It enables safe transactions, protects user data, and ensures the integrity of records. But while it brings many strengths, it also comes with a few challenges.

Here’s a quick comparison of the key benefits and limitations of cryptography in blockchain:

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Learn Cryptography and Blockchain with upGrad!

Cryptography in blockchain is essential for ensuring security, integrity, and trust within blockchain networks. Understanding types like symmetric and asymmetric cryptography, along with hash functions, helps you grasp how blockchain secures and manages data. 

Yet, many struggle to implement these techniques effectively due to a lack of structured, hands-on learning. upGrad offers specialized courses in cryptography and blockchain, featuring hands-on modules and expert guidance, to bridge that gap. 

You can also explore additional programs offered by upGrad that can help you on your blockchain journey.

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Get personalized guidance by scheduling a counselling session with our experts at upGrad Counselling and get the help you need for learning cryptography. You can also visit one of our offline centres for a more interactive experience.

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Reference:
https://www.reuters.com/sustainability/boards-policy-regulation/global-financial-crime-watchdog-calls-action-crypto-risks-2025-06-26/