Jul 23, 2022
027: What Makes a Blockchain Secure?
Key Characteristics Of Blockchain Security
The majority of cryptocurrency systems are built on the blockchain technology, which makes it impossible for this type of digital currency to be replicated or destroyed.
The entire purpose of using a blockchain is to enable people, especially those who don’t trust one another, to share important data in a tamper-proof and secure manner. That’s because blockchains use sophisticated math and cutting-edge software rules to store data, making it very challenging for attackers to manipulate the data.
Other applications for blockchain technology are being tested where data immutability and security are very important. Examples are; keeping track of charitable donations, maintaining medical databases, and supply chain management.
Blockchain security is not, however, a straightforward topic. Understanding the fundamental ideas and mechanisms that give these cutting-edge systems strong protection is crucial.
What makes blockchain secure?
Immutability and consensus: Although there are many factors that affect blockchain security, consensus and immutability are two of the most important ones.
Immutability is the ability of a blockchain to forbid transactions from being altered after they have been confirmed. Although the transfer of cryptocurrencies is frequently mentioned in relation to these transactions, they can also refer to the storage of non-monetary digital assets or data.
Consensus, on the other hand, refers to the ability of nodes in a distributed blockchain network to agree on the true state of the network and the authenticity of transactions. Consensus algorithms are commonly used in the process of reaching agreement.
When consensus and immutability are combined, they form the basis for data security in blockchain networks. Immutability ensures the integrity of data and transaction records once each new block of data is proven to be genuine. In contrast, consensus techniques, require that the system’s rules be followed and that all parties involved agree on the current state of the network.
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Cryptography: Blockchains depend heavily on encryption for data security. In this case, cryptographic hashing functions are crucial. When a message is only intended for a specific recipient, hashing is one way to enable security during message transmission. The hash is created using a formula, which aids in preventing tampering with the transmission’s security.
The security and immutability of blockchains depend heavily on hashing. Hashing is used in the consensus algorithms that validate transactions. For instance, the Bitcoin blockchain’s Proof of Work (PoW) algorithm utilizes the SHA-256 hash function. As the name implies, SHA-256 takes data and produces a hash that is 256 bits long, or 64 characters.
The security of wallets used to store cryptocurrency units and the preservation of transaction records on ledgers are both significantly aided by cryptography. Money can be kept safely for decades in a cryptocurrency wallet until the owner decides to use it (as long as the private key is kept secure).
Cryptoeconomics: In addition to cryptography, a more recent field called crypto-economics also contributes to the security of blockchain networks. It is associated with game theory, a field of study that uses mathematics to model how rational agents make decisions in situations with predetermined rules and rewards.
Briefly put, crypto-economics is the study of the economics that underlies blockchain protocols and the possible outcomes that their design may have depending on how its participants behave.
The time- and resource-intensive nature of the Bitcoin mining architecture was on purpose designed by Satoshi Nakamoto. PoW (proof-of-work) mining requires a significant investment of time and money due to its complexity and computational requirements, regardless of where and who the mining node is. As a result, such a system significantly reduces the incentives for malicious mining while substantially increasing the incentives for ethical mining.
The so-called 51 percent attack has the potential to be incredibly devastating if properly executed. But the likelihood of a malicious actor seizing control of the majority of nodes is nearly nonexistent because Proof of Work mining is so competitive and the Bitcoin network is so big.
Furthermore, the cost of the computational power needed to control 51 percent of a sizable blockchain network would make such a large investment for such a small potential return immediately unattractive.
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