Misconceptions About Bitcoin and Cryptocurrency
There are a few misconceptions about Bitcoin and cryptocurrency, which I have read and heard people talking. Some of them are listed here and I shall try my best to correct them. This list will be updated from time to time.
- Referring cryptocurrency to just "crypto". Technically, it is incorrect to link "crypto" to mean cryptocurrency. This is akin to calling "digital currency" as just "digital". I have read statements like: "I have a lot of cryptos". However, you don't say "I have a lot of digitals". So, it is better to stick with the term "cryptocurrency" as opposed to just "crypto" when referring to the former. Crypto is normally associated with cryptography.
- Bitcoin uses a public key infrastructure (PKI). A PKI requires the setting up of an infrastructure involving, among others, a Certificate Authority (which is a trusted third party) that is responsible to certify public keys. In Bitcoin, or any other cryptocurrency, there are no trusted third parties. Instead, public keys can be freely generated by users, without having the keys to be certified by any other party.
- Bitcoin uses encryption. No, there is no encryption whatsoever used in Bitcoin. The cryptographic operations employed in Bitcoin, and many other cryptocurrencies are hashing and signing. The former is performed using a cryptographic hash function and the latter with a digital signature scheme.
- A hash function is one-way, it cannot be decrypted back. The first part of this statement is correct, but the second part is not. A hash function is not an encryption function, hence, the term "decrypted" is wrongly used. A better way to write the second part of the statement would be "it is hard to invert given the hash digest of any message"