Blockchain — Security at it’s Best

Adith Narasimhan Kumar
Analytics Vidhya
Published in
5 min readNov 8, 2021


In the current age of big data, security has become a vital part. Few years back security was not shed any light upon. But times have changed and people have become more cautious and conscious about their online activity and security.

If you are a person who doesn't live under a rock, you probably would have heard about Blockchain. Even if you do live under a rock, you are in the right place to get started!

Image: Unsplash

We will be seeing the following

  1. Definition of Blockchain
  2. What actually is a Blockchain?
  3. Types of Blockchain
  4. Components of a real-world Blockchain
  5. Working of a Blockchain
  6. Reason for popularity
  7. A perfect system?

1. Definition of Blockchain

Blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.

2. What actually is a Blockchain?

Now that we have seen the definition, you might wonder what actually is a Blockchain? Blockchain is a method of recording information that makes it extremely difficult or impossible to cheat, hack or alter the system.

3. Types of Blockchain

There are various types of Blockchain structures that suit various use cases. Overall a Blockchain can be categorised into 2 types — Permissioned & Permissionless blockchains.

Permissioned blockchains — These chains restrict access to the chain and also restrict the rights of the nodes on that network. Hence permissioned blockchains are not completely decentralized.

Permissionless blockchains — These chains allow anyone to join the network. Permissionless blockchains tend to be more secure but transactions take longer to process due to the increased number of nodes in the chain.

Further drilling down, we can classify blockchains into 4 types

i. Public Blockchains

Public blockchains are permissionless in nature and are truly decentralized. The nodes that are part of this type have equal rights and are not restricted in any way. These nodes have the right to access, validate and create new blocks of data. Examples of Public chains are Bitcoin, Ethereum etc.

ii. Private Blockchains

Private blockchains are also referred as managed blockchains. Certain rights in this type of blockchain structure are restricted by the managing entity. hence this type of blockchain is not entirely decentralized since the control lies with a single entity.

iii. Consortium Blockchains

Consortium blockchain structures are permissioned systems that are overseen by a group of entities rather than a single one. Due to this, consortium chains are considered more decentralized than private chains and enjoy a higher level of security. However, consortium chains are hard to set up as a group of organizations must be involved and coordinated.

iv. Hybrid Blockchains

Hybrid blockchains are controlled by a single organization but with a level of oversight performed by a public chain.

4. Components of a real-world Blockchain

Various components work in synergy to make a transaction in a blockchain possible

i. Node

A node is a block in a blockchain. Every user in a blockchain is a node. A node can be of two types — Partial or Full. A partial node does not contain the copy of all the transactions. It contains only the hash of those transactions. Whereas, a full node contains a copy of all the transactions in the network.

ii. Ledger

A ledger is a digital database of information. A ledger can be of 3 types — Public, Decentralized, Distributed. Public ledger is open and transparent to all. In Distributed ledgers, all nodes have a local copy of the database. In a decentralized ledger, no single node has central control

iii. Wallet

A wallet is used to store the cryptocurrency in a blockchain. Wallets can be of 2 types — Hot wallets and cold wallets. Hot wallets are connected to the internet whereas cold wallets are not.

iv. Nonce (Number only used once)

This is a 32-bit number that is generated only once and added to an encrypted block to make it secure

v. Hash

In blockchain, a hash plays a very important role. The hash on one block is the input for the next block.

5. Working of a Blockchain

Now that we have seen the components of a blockchain, let us now look at how a blockchain works.

The process is generally initiated when a new transaction takes place. Once the transaction is requested and authenticated, a new block is created for the same.

After the block is created, it is then sent to every node in the network. Following this, the nodes validate the transaction using proof of work and in turn receive a reward for it. This reward is mostly in the form of cryptocurrency.

As soon as this process is complete, the newly created block is added to the existing chain and the update to the chain is distributed across the network.

After all this the transaction is understood to be complete.

6. Reason for popularity

The reasons for the popularity of blockchain are the drawbacks and vulnerabilities of our current gen data storage solutions. Our current gen solutions offer scalability and security up to a certain level. But one major issue that is prevalent till date is the centralized architecture. Blockchain rose to fame due to its decentralized architecture where no single entity is given full control of your data.

On paper, blockchain is a system too good to be true. Is it perfect? Let’s see!

7. A perfect system?

Even though its security and privacy is miles better than current systems, it is no way a perfect system. It has it’s own issues just like any other technology. To mention a few, one of the major issues of blockchain is that integration to other legacy or even modern systems for that matter, is a tough task. After a certain point, scalability, due its redundant nature is also another problem as the chain grows.


Blockchain provides compelling features and security/privacy measures to sway the common person’s choice to its side. But it ultimately boils down to the individual’s use case. Some ways our traditional systems provide better value compared to blockchain systems and vise versa in other cases. That said, I think blockchain technology is here to stay and if improved, will provide a truly secure storage solution to our data needs.