Understanding types of encryption: from theory to practice in cryptocurrencies

Why Encryption Types Matter for Cryptocurrency Wallet Users

Everyone who works with cryptocurrencies encounters the terms “public key” and “private key,” but few understand how exactly they protect assets. In fact, this is based on one of two main systems: symmetric and asymmetric encryption. To understand the security of your crypto assets, it is important to know the difference between these types of encryption and how they work.

Two main approaches to data protection

Modern cryptography is built on two fundamental approaches. The first — symmetric encryption — uses a single key to simultaneously encrypt and decrypt information. The second — asymmetric encryption — works with two different keys that are mathematically related to each other: a public key ( for encryption ) and a private key ( for decryption ).

This fundamental difference is not just a technical detail — it defines the entire approach to the security of the system and the ways it is used.

How Encryption Types Work in Everyday Scenarios

Symmetric encryption in action: Imagine that Katya wants to send a secret message to Maksym. She encrypts it with one key and sends it. To decrypt, Maksym must receive that very key. The problem: if an attacker intercepts the key during transmission, they will be able to read everything that is protected. This is the main vulnerability of symmetric systems.

Asymmetric encryption as a solution: The same scenario, but differently. Max has two keys: a public ( that he can publish ) and a private ( that no one knows ). Katya takes Max's public key, encrypts the message, and sends it. Even if an attacker intercepts the message and the public key, they will not be able to decrypt it — for that, Max's private key is needed, which no one else has.

Technical specifications: key lengths and computational costs

Types of encryption vary not only in principle but also in technical parameters. In symmetric systems, keys usually consist of 128 or 256 bits. Such length provides sufficient security because there is no mathematical connection between the key and the protected data.

In asymmetric systems, the situation is different. Since the public and private keys are mathematically related, it is potentially possible to attempt to guess the private key by analyzing the mathematical connection. To prevent this, asymmetric keys must be much longer—usually 2048 bits or even 4096 bits. Interestingly, a 128-bit symmetric key provides an equivalent level of security to that of a 2048-bit asymmetric key.

This leads to a somewhat paradoxical result: symmetric encryption works faster and requires fewer computational resources, while asymmetric encryption is slower and more energy-intensive, but it solves the critical key distribution problem.

Practical application of encryption types in the modern world

Where symmetric encryption predominates: The Advanced Encryption Standard (AES) is used by the U.S. government to protect classified information. Previously, DES, developed back in the 1970s, was used. Where high speed is required and in systems where parties already have a shared secret key, this type predominates.

Where asymmetric encryption is needed: Encrypted email, website protection, digital signatures — in all these cases, it is necessary for many people to interact without prior agreement on a shared key. Therefore, asymmetric encryption is the only sensible choice.

Hybrid approach is the most effective: SSL and TLS protocols combine both types of encryption. Asymmetric encryption first establishes a secure channel and exchanges symmetric keys, then all data exchange operates on fast symmetric encryption. SSL is already considered outdated, so it should be discontinued, while TLS remains the standard in all major browsers.

How Encryption Types Protect Cryptocurrency Wallets

In cryptocurrency wallets, encryption is applied in several ways. When a user sets a password, the program encrypts the wallet access file — often using symmetric encryption for speed.

However, there is a common misconception: Bitcoin and other cryptocurrencies use public and private keys, but that does not mean they employ asymmetric encryption. In fact, it is about asymmetric digital signatures, which are somewhat different. A digital signature can exist without encryption.

Yes, the RSA algorithm can be used for both encryption and signatures. But ECDSA — the algorithm used in Bitcoin — performs exclusively digital signatures without encryption. This is an important technical distinction that often goes unnoticed.

Choosing the Right Type of Encryption: Advantages and Limitations

Symmetric encryption is the choice for processing large volumes of data where speed is critical. Asymmetric is the choice for systems where people cannot agree on a shared secret in advance. In practice, both types of encryption often work together, each system performing its function.

Why Understanding Types of Encryption is Useful for Crypto Users

As cryptography evolves to protect against new threats, both types of encryption remain relevant. Understanding the difference between them helps grasp why public and private keys are used in wallets, how digital signatures for transactions work, and why a private key should never be shared. This is basic knowledge for safely working with cryptocurrencies in today's digital world.