Digital Journal

Dfinity’s ICP, Bitcoin, and Ethereum: What Threshold ECDSA Signing Means For Crypto

Jaipur, Rajasthan, India — These days, the word “cryptocurrency” inspires a myriad of thoughts. For those more familiar with the space, the term may conjure up thoughts of bitcoin, ether, Dfinity’s ICP, or other altcoins. Individuals participating in the blockchain industry may think of non-fungible tokens (NFTs), decentralized finance (DeFi), or other related subindustries made possible by this new creation.

What seldom comes to mind is how the mechanics of cryptocurrency are even possible. These days, the ability to safely and securely send and receive cryptocurrency in a trustless — without third-party involvement — manner is largely taken for granted. 

As several blockchains begin to mature, and as the need to interact across blockchains begins to rise, communities are starting to realize the importance of this topic, especially as cross-chain transactions become more desired by crypto users.

The recent news of an upcoming bitcoin integration makes that project just one of the many that Dfinity and the Internet Computer blockchain are actively working on and discussing. Within the year, Dfinity’s Internet Computer blockchain aims to make it possible for both the Internet Computer and bitcoin to interact with each other directly — all without the need for bridges.

How are such things done, and how does the underlying technology make it possible for these interactions to happen? We explore further in the sections below.

The word “crypto” traces its roots back to Greece (the Greek word “kryptós” translates to “hidden”).

Cryptography, which is the field of computer science that makes cryptocurrency possible, has existed since 1900 B.C. — making the field more than 3,900 years old and one of the oldest areas of science in existence. The first use of cryptography was discovered in ancient Egypt, found in the tomb of Khnumhotep II, a high-ranking noble who served during the 12th Dynasty of the Middle Kingdom period. In this tomb, “unexpected hieroglyphs were used in place of usual ones.” While it remains relatively unknown whether or not this was done to hide meanings,  it marks the first known time a message was transformed from its original text.

Fast-forward thousands of years later, and humanity has evolved from this initial form of cryptography to significantly more sophisticated methods made possible via enormous strides in mathematics, computer science, and technology.

An Overview of RSA, DSA, and ECDSA

RSA (Rivest-Shamir-Adleman) Algorithm

Our research shows  probably one of the most common and familiar forms of cryptography known to the public is the RSA algorithm. RSA is an asymmetric cryptography algorithm, which means that it uses a private key and a public key. Many who work white-collar jobs may be familiar with RSA SecurID tokens, which are used during the process of connecting to a virtual private network (VPN). This connection, often needed by employees to access their company’s intranet, is one of the most common uses of RSA (and, by extension, cryptography) in today’s world.

To build an understanding of cryptography algorithms and encryption methods, it may help to explore briefly how RSA works using an asymmetric cryptography algorithm. On a high level, the concept is simple. Two keys — one known as a private key and the other as a public key — are initially created. For private keys to be effective, it must be kept safely and securely with knowledge of the key’s information kept only by a singular person or entity. Conversely, public keys can be distributed to anyone in the world.

A more user-friendly analogy can be drawn by referencing sending, receiving, and accessing emails works. The private key would be a user’s email password, while the public key would be the user’s email address. Anyone can have a user’s email address but only the user who owns the account can have the private key (password) to access the contents of the email inbox.

Research shows that RSA works similarly. RSA-encrypted messages  will first secure the message with the recipient’s public key (comparable to typing a recipient’s email address in an email). The public key enciphers (encrypts) the message, after which it’s  sent to the intended recipient. The recipient, upon receiving the message, can only access the contents of the message by entering their private key to decipher (decrypt) the encryption (similar to typing in a password to enter into a user’s email inbox).

Invented in the late 1970s, RSA has existed for decades and continues to be one of the most efficient and effective ways of securing information and leveraging the benefits of cryptography in the modern world.

DSA (Digital Signature Algorithm)

From the late 1970s, the science of cryptography continued to evolve and grow as governments, corporations, and entities worldwide increasingly acknowledged the growing importance of protecting data, intellectual property, research, and more.

In the early 1990s, the National Institute of Standards and Technology (NIST), a government agency of the United States Department of Commerce, proposed a new cryptographic system for digital signatures.

What is a digital signature and why are they needed?

According to the U.S. Cybersecurity and Infrastructure Security Agency, digital signatures are a “mathematical algorithm routinely used to validate the authenticity and integrity of a message.” In layman’s terms, digital signatures are a form of online identification that helps tie a digital file to a unique sender. As the world continues to conduct more and more transactions and correspondences online, research shows digital signatures are critical so parties in a particular transaction can expect the transactions were conducted between trusted parties — something digital signatures help facilitate.

Understanding how the RSA algorithm works, it won’t be too difficult to understand how digital signatures function, because at a high level the concept works similarly.

While RSA focuses on ensuring that only the recipient of a message can decipher a transaction, the focus of digital signatures is to ensure the recipient can verify the authenticity of the sender. Therefore, using digital signatures, senders encrypt using their private key, while recipients decrypt the same transaction using the public key, verifying the provenance of the signer of the message.

The intricacies of exactly how the digital signature algorithm functions are beyond the scope of this article. However, research reveals DSA is considered to be a Federal Information Processing Standard (FIPS) for digital signatures, which builds on the concept of how digital signatures are to work by functioning on a “framework of modular exponentiation and discrete logarithmic problems.” This framework strengthens digital signatures by making them difficult to crack via brute force attacks.

ECDSA (Elliptic Curve Digital Signature Algorithm)

Research shows that, unbeknownst to most cryptocurrency participants, the ECDSA signature verification algorithm is the cryptography that works behind the scenes for the world’s two most popular cryptocurrencies – bitcoin and ether. ECDSA, which is considered an alternative technique to RSA, is tied to DSA by working as an elliptic curve implementation of the digital signature algorithm.

As mentioned earlier, Dfinity’s Internet Computer is working on an integration of bitcoin. Bitcoin leverages ECDSA  for the transactions on its network. As a result, Dfinity’s IC is developing the capabilities needed related to this algorithm to safely, securely, and successfully interact with the bitcoin blockchain.

Surprisingly, ECDSA has been in existence since the mid-1980s. Possibly because it’s been overshadowed by the more common use of RSA and DSA, ECDSA remains a type of cryptography that’s not commonly referenced in everyday life. 

Previously, we explained digital signatures. But what exactly is meant by elliptic curve cryptography?

Students who paid attention during advanced math classes may have learned the concept of elliptic curves. Without getting too mathematical, an elliptic curve is the set of points that satisfy the equation:

y2 = x3 + ax + b

Reviewing the above equation, it’s clear that the variables “a” and “b” can contain an infinite range of numbers. However, it’s important to note that the bitcoin and ethereum networks utilize a very specific version of the elliptic curve. To define the curve used by these networks, parameters have been defined such that a = 0 and b = 7. Plugging into the previous formula, this produces the updated elliptic curve equation:

y2 = x3 + 7

This specific elliptic curve is also known as Secp256k1, which references the parameters of the specific curve utilized for both bitcoin and ethereum and is used along with the SHA256 hash function to digitally sign the transaction/file on the underlying blockchain.

Without getting into the specifics of exactly how the ECDSA operates, this cryptography method offers several advantages over the RSA and DSA methods covered previously.

Between RSA and ECDSA, ECDSA is significantly more complex due to the usage of elliptic curves, thus offering greater cryptographic strength than RSA. From a key size perspective, ECDSA uses much shorter keys in comparison to RSA,  which requires longer keys to provide a similar level of security. Due to this difference in key size, performance is also enhanced (meaning less processing power required) for ECDSA in comparison to RSA.

Between ECDSA and DSA, the difference lies in performance (speed and length of keys). Whereas DSA requires a key length of 3,072 bits to provide 128 bits of security, ECDSA needs only key lengths of 256 bits to achieve the same level of security.

ECDSA and What It Means for Dfinity’s Integration of Bitcoin and Ethereum

As briefly mentioned above, both the bitcoin and ethereum networks leverage ECDSA as the cryptographic algorithm to ensure that funds are only spent by those who truly own them.

The Dfinity Foundation announced in late February 2022 that bitcoin smart contracts would be coming to the Internet Computer blockchain. These BTC smart contracts would be made possible as a result of Dfinity’s bitcoin integration, which allows Dfinity IC canisters to “obtain ECDSA public keys and to securely sign messages under that public key.” This means that the Internet Computer has a direct integration with bitcoin wherein both networks are able to talk with one another. As a result, bitcoin transactions on the Internet Computer blockchain would be completely trustless, requiring no bridge and no dependency on any third parties, alleviating significant security concerns as bridges have been (and continue to be) targets of interest for nefarious Web3 actors.

Future plans are in place for the same integration between the Internet Computer and the ethereum network. Dfinity also plans to have interoperability with other blockchains beyond bitcoin and ethereum and is positioning itself as a solution to assist those chains in some of the most critical areas associated with blockchains — storage costs, computation costs, and scalability.

From a storage cost perspective, casual ethereum blockchain users may be shocked to learn that one GB of smart contract data could cost upwards of $100M on the ethereum network. Conversely, the same amount of storage on the Internet Computer would cost approximately $5. 

Heavy ethereum users during 2021 and early 2022 will be familiar with the term “gas wars,” where peak times of ethereum usage (e.g. perhaps associated with NFT minting) drove the costs of using the network to hundreds, if not thousands, of dollars. Conversely, with Dfinity’s Internet Computer’s ultra low computation and transaction costs, the financial barriers that everyday users must face in utilizing the network are removed, thereby paving the way for greater opportunities to scale.

Exciting Next Steps

It is hard to imagine that the proposal to integrate bitcoin with Dfinity’s Internet Computer took place only during the final days of Q3 2021. Less than nine months later, the integration is not only in full swing, but the latest ETA estimates have the integration arriving during May 2022.

With a successful integration, and ethereum, as well as other blockchain integrations on the horizon, research shows that there’s a lot to be excited about for Dfinity’s Internet Computer blockchain. Leveraging all the benefits of these underlying chains, along with all the benefits of the Internet Computer (true decentralization, lighting-fast speeds, extremely low costs, and interoperability), blockchain technologies, crypto transactions, and the world of Web3 are about to get a lot more exciting.

Media contact

Name: Shailesh Kumar
Email: [email protected]
Address: New Sanganer Road, 47/195, Rajat Path, Mansarovar, Jaipur, Rajasthan 302020