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Encryption
Converting plaintext into unreadable characters with a key
Decryption
Converting unreadable characters into plaintext with a key
Encryption is _____________
a 2-way function
Hashing
Converting plaintext of any length into a short code
Hashing is _____________
a 1-way function
Can you recover plaintext from a hash?
No
3 Fundamental issues of a currency system?
How to buy original art?
How to sell art from collection?
How to detect stolen art?
In the U.S., our current currency system is......
Fiat
Barter System example
Offering chickens for a yearly newspaper subscription
What is a problem with the Barter System example?
If the newspaper editor doesn't need chicken, but bread instead
What is a solution to the Barter System problem?
Find something that is valuable to everyone (gold)
Why choose gold as a solution to the Barter System?
It's rare, but not too rare
Gold Standard
A monetary system where a country's currency or paper money has value directly linked to gold
What does the fixed price for gold determine?
The value of the currency
If the U.S. sets the price of gold at $500/ounce, the value of the dollar would be...
1/500th of an ounce of gold
Do we currently follow the gold standard?
No, we follow the Fiat system
Fiat System
Monetary system where the value of currency isn't based on a physical commodity, but fluctuates dynamically against other currencies on the foreign-exchange market
Fiat is derived from what word?
Latin fieri- which means an arbitrary act or decree
The value of fiat currencies is based on what?
The fact that they're legal tender by government decree
Is the gold standard currently used by any government?
No
What is officially crowned as the world's reserve currency?
U.S. dollar, backed by the world's largest gold reserves
What WWII agreement crowned the U.S. dollar as the world's reserve currency?
Bretton Woods Agreement
In the U.S., which president ended the Bretton Woods system & began the era of free floating fiat currencies?
Nixon
In a banking system, what role does the bank act as?
A middleman trusted by both parties
What if there is an alternate middleman, instead of a bank, that is fast, automated, transparent, and free from hacking/tampering?
Block chain
Bitcoin
1st cryptocurrency developed based on blockchain technology
Who invented Bitcoin?
Unknown group/person by the name Satoshi Nakamoto
What is a block chain?
A unchangeable, distributed, decentralized ledger in chronological order
What does a block chain do?
Construct a valid block from encrypted transaction data within a certain time period
What is a ledger?
A record of transactions in chronological order
What if the ledger is tampered?
If it's not accurate, value decreases
What must be done for a valid transaction to take place in a bank?
It needs an entry/record in the bank's ledger
T/F: Every institution has their own ledger
True
Block Chain
Public ledger where blocks sit one after another chronologically
Every block contains what?
Encrypted data of all transactions from the past 10 minutes
All data in a block is public to the world, but it's encrypted. In order to read it, what do you need?
A private key
When looking at the block chain, everyone can see the _________, but not the ____________
transaction; sender or receiver
Why are there two output amounts on a block chain transaction log?
The total subtracts a network fee which is used to pay miners for verifying and confirming the transaction
Can you change a block on the block chain?
No
Blocks exist in the chain one after another in chronological order, which means.....
every block knows which blocks existed before it
Block chain is a distributed & decentralized system, which means...
The same data exists in thousands of computers around the world
How do you think block chain might change the future of banking?
No middleman (bank)
Low network fee
Decentralized & transparent
Very fast
Transactions that take place in the block chain network are done through what type of currency?
cryptocurrency
4 Examples of Cryptocurrencies
Bitcoin, Litecoin, Ethereum, Monero
Do exchange values of cryptocurrencies fluctuate like fiat currencies?
Yes, based on how many people use it
What is the first implementation of block chain technology?
Bitcoin
Altcoins
alternative cryptocurrencies launched after bitcoin's success
5 Altcoin examples
Ethereum, ripple, zcash, monero, dash
All existing fiat currencies are controlled by who?
The government- federal bank
What happens when governments start publishing a ton of bank notes?
Inflation
What is the maximum number of bitcoin to be mined?
21 million (so no inflation)
How long does it take to create/mine bitcoin?
10 minutes
What does Bitcoin use as its cryptographic hash algorithm?
SHA-256
Miners
People who solve cryptographic puzzles using computational resources
What is the concept behind Bitcoin?
Proof of Work
Cryptographic puzzle difficulty level
5 leading 0s (00000) indicate how hard it is to solve the puzzle
How do miners solve the puzzle?
By finding a cryptographic hash that matches the puzzle pattern through combining encrypted transaction data, hash of previous block, and random nonce
Proof of Work
Finding the block hash using computational resources
Merkle Root
32-byte hash that represents a summary of all transaction data
Merkle Tree
"Binary hash tree" - Each parent node contains the hash of its child nodes, and each leaf node contains the cryptographic hash of its single data node.
Advantages of a Merkle Tree
Tamper proof
Uses fewer resources
Verifies a transaction
If Alice owes Bob 1BTC for a service, what does she use to make the transfer?
A bitcoin wallet
What triggers Alice's transaction into entering the peer-to-peer block chain network?
When Alice triggers transaction of 1 BTC to Bob's public key
What two keys does Alice need to set up a transfer to Bob on the bitcoin network?
Her own private key & Bob's public key
What kind of network is the Bitcoin Network?
Peer-to-peer
The Bitcoin Network steps
New transactions broadcast to all nodes
Each node collects new transactions into a block
Each node does proof-of-work for its block
When proof-of-work is found, node broadcasts the block to all nodes
Nodes accept block if all transactions are valid
Nodes accept block by working on creating the next block using the accepted block hash as the previous hash
What is used to encrypt/decrypt data?
A key
What is an encryption key?
A large random # known only to the sender/recipient
What happens if anyone other than the sender/recipient knows the value of a secret key?
They can decrypt an encrypted document and breach confidentiality
Encryption is a _____________ function
two-way
Disadvantage of encrytion
It relies on the secret of key
What are the two types of encryption?
symmetric and asymmetric
In symmetric encryption, there is ___________ key
one shared/secret
In asymmetric encryption, there is ________________ key
a pair of keys: private & public
T/F: Private & public keys are mathematically linked together
True
Can you derive the private key from the public key?
NO, it's mathematically impossible
Which key is used to encrypt in asymmetric encryption?
Recipient's public key
Which key is used to sign something in asymmetric digital signature?
Sender's private key
Encryption is used for...
Confidentiality
Digital Signatures are used for...
Authentication & Nonrepudiation
HTTPS port
443
2 steps of the HTTPS protocol
Handshake
Data transmission
Once a client & server agree to use TLS, how do they negotiate a connection?
By using a handshake to agree on parameters required for a secure connection
Once the handshake concludes, what begins?
Secure data transmission
How are SSL & TLS different?
SSL is the predecessor to TLS
How does SSL/TLS verify the identity of communicating parties?
asymmetric (public-key) cryptography, typically required on the server
After successful authentication with SSL/TLS, what type of cryptography is used to encrypt the data?
symmetric key cryptography
Is symmetric or asymmetric key cryptography faster?
symmetric
SSL/TLS handshaking happens with what kind of cryptography?
with asymmetric cryptography
SSL/TLS secure data transmission happens with what kind of cryptography?
with symmetric cryptography
What kind of cryptography does SSL/TLS use?
Both asymmetric & symmetric
Client hello message
When a client connects to a TLS-enabled server to request a secure connection, presenting a list of supported cipher suites
Cipher suite
A combination of encryption and key exchange algorithms used to negotiate security settings
T/F: Different versions of different client browsers support different cipher suites
True
A server's Digital certificate contains what 3 things?
Server name
Trusted CA
Server's public key
Top three Certificate Authorities (CAs)
Comodo, Symantec, GoDaddy
Server hello message
Server picks the strongest cipher suite it supports and notifies the client
Digital certificates are specified by which standard?
X.509
Handshake steps
Client sends hello message to server
Server sends hello message to client
Server sends digital certificate as its identification to client
Client confirms server certificate is valid
Client sends Pre-Master secret key to server
Client & server both generate a symmetric encryption key from the shared PMS
What is the Pre-Master Secret key eventually going to be used for?
Generating a symmetric encryption key
Note 
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