Applications of Homomorphic Encryption in Blockchain

Homomorphic encryption is the process by which a function can be applied to data without decrypting the data. The following topics will be covered here:

1. Introduction To Homomorphic Encryption
2. Homomorphic Encryption in Bitcoin
3. Real-World Examples
4. Applications of Homomorphic Encryption in Blockchain
5. Conclusion

Let’s discuss these topics in detail.

Introduction to Homomorphic Encryption

Homomorphic Encryption is a relatively new development in the field of cryptography. It is sometimes also called computationally secure encryption because it allows for easy calculations on encrypted data without revealing any information about what is inside.

• It is the general concept of operations on encrypted data, whereas Fully Homomorphic Encryption is the special case where all operations can be done and all results are revealed.
• The ability to perform operations on encrypted data without decrypting is a major advantage because it allows for peace of mind in storing sensitive and personal data. 
• For example, medical information from hospitals, national security information from military or police forces, or even private information from companies.
• One example is credit card numbers that are stored by a company. If somebody wants to know how much money someone has on their card they could calculate this amount on an encrypted version of the card number and never need to know the original card number itself.

Homomorphic Encryption in Bitcoin

Many people may not know that Bitcoin private keys are exposed to the public. Every time someone sends a bitcoin transaction, the information about this transaction is broadcasted to every person in the Bitcoin network.

• This is a big problem because if someone were to hack into the computer and steal the private key’s file, then they would be able to keep sending bitcoins from your account and one would never know because it looks valid on the surface. But once again, this means that everybody in the world has access to the private key’s file so it is necessary for encryption technology such as homomorphic encryption.
• Homomorphic encryption makes it possible to perform computations on encrypted data. This means that if one has an encrypted private key, one can still do the calculations to generate a valid transaction with that key.
• This is the basic concept of homomorphic encryption. 
• Let’s suppose we have a homomorphically encrypted private key file (let’s call it A) and we want to send a bitcoin transaction with it, but we don’t want anybody to know what our original private key was. So we encrypt the transaction with our homomorphic private key file “A,” and broadcast off the transaction information just like normal.
• In the world of bitcoin, there are a few ways that privacy is being compromised. When using bitcoin, there are several ways in which your privacy might be compromised. For example, any transaction could be traced back to you, and you could be put at risk of becoming a victim of blackmail or extortion. Even though bitcoin transactions are public, there are some techniques that may help you protect your identity from prying eyes. Ultimately, the best way to preserve privacy when using bitcoin is to make sure that the cryptocurrency never touches your real identity.

Real-World Examples

• Let’s say someone wants to buy a cup of coffee from Starbucks using bitcoins. As soon as someone sends or receives bitcoins anywhere on the internet, what happens is it’s broadcast across the entire network. Everyone knows about it, who sent it and who received the bitcoins. It’s easy to scan any bitcoin transaction and go back to the public ledger, which is called the blockchain.
• It’s a little bit like if someone is walking down the street with $100 bills declaring to anyone who sees ‘Hey, I have this!’. So this is not necessarily a very private way of using the money. 
• There’s a better way to preserve privacy when using bitcoin, which is by never spending bitcoins in places where they can easily be linked back to you. 

Applications of Homomorphic Encryption in Blockchain

• Homomorphic encryption makes it possible for computations, such as addition, to be carried out on private data without exposing any information about what was computed. 
• A blockchain is a digitized, decentralized, public ledger of transactions. The system works as a distributed database and anyone on the network can see what is happening. The user receives full control over your own data, a powerful concept in this day and age. There are some issues though, given that the blockchain is exposed publicly to transactional information stored in blocks and many people don’t want their holdings or transaction history out there for all to see. 
• It offers a degree of protection against side-channel attacks and malware that might exploit unencrypted processing steps in blockchain-based transactions as well as against system administrators who could otherwise glean information about transaction details from their logs.
• Since blockchain is made up of encrypted blocks and transactions, homomorphic encryption is an attractive tool for implementing privacy features–particularly around adding private transactions or basic mathematical operations–without breaking that cryptographic protection.
• If necessary, homomorphic encryption can also be used to allow for unencrypted computations to be executed on the same plaintext data being used for encryption. This allows for private cryptographic keys (or other data) to be generated from opaque input, without knowing what that input was.
• Bitcoin employs Homomorphic encryption in order to keep transactions private.
• Homomorphic encryption is also employed in the latest Blockchain innovation, Zero Knowledge Proof.

Conclusion

In order to preserve privacy in the blockchain world, one must first have an understanding of how bitcoin addresses function. Bitcoin addresses are used for sending and receiving bitcoins. A bitcoin address is generated by a cryptographic hash function, which turns a string of 25-35 random characters into a seemingly random string. The actual address is derived from this single hash function, using various groups of letters, numbers, and symbols as input to generate an address. Unlike other types of public key cryptography (such as encryption), the bitcoin address is not derived from private information such as your name or bank account number. Such data could easily be linked back to your real identity if you were found to be using bitcoin addresses that were not really random values.