Almost all communications, transactions and credentials are protected by asymmetric key cryptography (AKC). The use of such systems is the basis of Terran society, making it radically different to any previous social structure.
All cryptosystems rely on the use of 'keys' which which to encrypt or decrypt messages. In 'symmetric key' cryptosystems, a message encrypted using a key can only be decrypted using the same key. As long as both parties, Alice and Bob, have a copy of the same key they can communicate without the possibility of Eve listening in. Eve can, in principle, break the code of any message whose key is shorter than the message, but in strong cryptosystems the amount of time required on any conceivable computer can be made longer than the age of the universe.
The problem with symmetric keys is that Alice and Bob must find some way to exchange a key. Clearly if they can do so without Eve intercepting it then they have no need for the cryptosystem: they can use the secure channel for all communication.
AKC sidesteps this problem. The system relies on the use of two keys, one public and the other private. Either key may be used for encrypting a message, but that message may only be decrypted using the other. The system relies on it being extremely hard to deduce the private key solely from knowledge of the public key.
As well as encrypting a message it is possible to sign it in an unforgeable way. Alice's signature is simply the encryption of the message using her private key. Anybody can decrypt such a message using Alice's public key, and be sure that it could only have been encrypted using her private key.
Should Alice wish to send a confidential, signed message to Bob she signs it with her private key and then encrypts it with his public key. On receiving the message, Bob decrypts it with his private key and then checks the signature using Alice's public key. Bob can be sure that the message has not been read by Eve as she could not decrypt it without his private key, nor could she have sent it without access to Alice's private key. The communication between Alice and Bob is thus secure and authenticated.
If Bob wishes to send an unsigned message to Alice (for example, an anonymous note) he can use her public key to encrypt it: this provides security without revealing his identity.
In the early years of the information age it was possible to compile intrusive dossiers on almost anybody by linking the information contained in many different databases. It was relatively easy to trace people's use of credit cards and communication systems, to gain information on their financial and medical history and criminal record. Even worse, it was almost impossible for individuals to learn who kept files on them, to ensure the accuracy of such files, or to control access to them. Clearly there was great potential for the misuse of this information by both governments and corporations; on the other hand organizations often have legitimate needs for accurate information on those that they do business with.
The system of digital pseudonyms prevents such linkages between records kept for different purposes, allows a high level of privacy and avoid the possibility of fraud.
People use a different pseudonym in their interactions with each organization. Each organization is only given the bare minimum of information it needs. Each organization 'trusts' certain others, meaning that it is willing to accept that certain facts are true if a trusted organization or its representative (one step further down the chain of trust) signs a declaration to that effect.
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