Math of Cryptocurrency: Understanding Ethereum and Bitcoin Cryptography

Math of Cryptocurrency: Understanding Ethereum and Bitcoin Cryptography

Cryptocurrencies like Ethereum and Bitcoin rely on cryptography to ensure the security and integrity of transactions. In this article, we will explore the basics of cryptography in Ethereum and Bitcoin, including the generation of private and public keys, the use of elliptic curve cryptography, and the creation of Ethereum addresses. By understanding these fundamental concepts, you can gain a deeper insight into the underlying mechanisms that power these cryptocurrencies.

Cryptography: Safeguarding Digital Assets

Cryptography plays a vital role in securing digital assets in Ethereum and Bitcoin. It involves the use of mathematical algorithms to encrypt and decrypt information, ensuring confidentiality, integrity, and authenticity. Two key components of cryptographic systems are private keys and public keys.

Private Keys: Guardians of Ownership

A private key is a randomly-generated number that serves as a digital signature of ownership. In Ethereum, a private key allows users to control their fundsand authorize transactions.It is crucial to keep the private key secure at all times to prevent unauthorized access to funds.If a private key is lost,the associated funds become permanently inaccessible.

Generating a private key involves finding a secure source of randomness.Ethereum software utilizes the operating system’s random number generator to generate a 256-bit random number,resulting in a private key that is a massive 78-digit number.It is essential to generate private keys offline and avoid using simple random number generators provided by programming languages to ensure the security of the key.

Public Keys:Derived from Private Keys

A public key is derived from a private key using elliptic curve multiplication.It is a set of x and y coordinates on an elliptic curve that satisfies the elliptic curve equation.The public key is generated through a one-way function,making it impossible to derive the private key from the public key.

Ethereum uses the same elliptic curve,secp256k1,as Bitcoin.This curve is defined by the equationy²=(x³+7)mod p,wherepis a large prime number.The coordinates of the generator pointGon thesecp256k1curve are used in the elliptic curve multiplication process to derive the public key from the private key.

Ethereum Addresses:Hashing the Public Key

Ethereum addresses are created by taking the Keccak-256 hash of the public key and representing it as a hexadecimal number.The last 20 bytes of the hash are used to generate the address.The Interchange Client Address Protocol(ICAP)provides a flexible and interoperable encoding system for Ethereum addresses,making them compatible with the International Bank Account Number(IBAN)encoding.

To generate an Ethereum address,you can use command-line tools like helpeth,which utilize the private key to derive the public key and subsequently generate the address.It is important to note that manually calculating a public key from a private key using the Elliptic Curve Digital Signature Algorithm(ECDSA)and thesecp256k1curve is a complex process best left to specialized libraries or tools.

Elliptic Curve Cryptography:The Foundation of Security

Elliptic curve cryptography(ECC)is the foundation of security in Ethereum and Bitcoin.It is a form of asymmetric or public-key cryptography that involves performing mathematical operations on points of an elliptic curve.ECC offers several advantages over traditional cryptographic algorithms,including smaller key sizes and faster computations.

Elliptic Curve Multiplication:Generating Public Keys

Elliptic curve multiplication is at the core of ECC.It is a one-way function that is easy to perform in one direction(multiplication)but computationally infeasible to reverse(division).This property makes it an ideal tool for generating public keys from private keys,ensuring the security of the private key.

In Ethereum,thesecp256k1curve is used for elliptic curve multiplication.The generator pointGand the private keykare used in the equationK=k*Gto derive the public keyK.The resulting public key is a set of x and y coordinates on thesecp256k1curve and cannot be used to determine the private key.

Benefits of Elliptic Curve Cryptography

Elliptic curve cryptography offers several benefits that make it an attractive choice for securing cryptocurrencies like Ethereum and Bitcoin.Some of these benefits include:

  1. Smaller Key Sizes:ECC provides the same level of security as traditional cryptographic algorithms with smaller key sizes.This reduces storage requirements and computational overhead.
  2. Faster Computations:ECC operations are computationally faster compared to traditional algorithms like RSA.This makes ECC ideal for resource-constrained environments.
  3. Resistance to Quantum Attacks:ECC is believed to be resistant to attacks from quantum computers,which have the potential to break traditional cryptographic algorithms.This future-proofs cryptocurrencies that rely on ECC.


Cryptography is a fundamental aspect of Ethereum and Bitcoin that ensures the security and integrity of transactions.Private keys and public keys play a crucial role in establishing ownership and authorizing transactions.Elliptic curve cryptography forms the foundation of security in these cryptocurrencies,providing smaller key sizes,faster computations,and resistance to quantum attacks.By understanding the basics of cryptography in Ethereum and Bitcoin,you can appreciate the underlying mechanisms that enable these digital currencies to function securely and reliably.