Blockchain is one of the trendiest domains in today’s technology-driven world. As the world moves towards Blockchain technology, the first and foremost concern is the security of Blockchain.
Firstly, let me give you a brief overview of Blockchain Security.
- Encryption scrambles data so that only authorized parties can read it. It is the conversion of plaintext to ciphertext in technical terms. In layman terms, cryptography converts data into a format that can be deciphered only by people who have permission.
We will be discussing Cryptography in detail in later sections.
- Blockchain mining is a peer-to-peer computer process that is used to secure and verify bitcoin transactions. Bitcoin transaction data is added to Bitcoin’s global public ledger of past transactions by Blockchain miners.
- You can’t change data that’s already in the blockchain because it’s an immutable database. A hash value is a one-of-a-kind value that identifies a single block. It depends on the content of the block, so each block has its hash value that only identifies the current block.
So, let us briefly discuss how fraudsters can manipulate Blockchain.
Any hacker will be able to control the Blockchain if he is in control of 51% of the computing power of the Blockchain.
A 51 per cent attack on a blockchain occurs when a group of miners controls more than 50% of the network’s mining hash rate or computing power.
The attackers will be able to stop new transactions from receiving confirmations, effectively halting transfers between any or all users.
They’d also be able to undo transactions that had already been made while in charge of the network, allowing them to double-spend coins.
What are the security features of Blockchain?
- Smart Contracts: A smart contract is a computer programme or transaction protocol that is designed to automate the execution, control, and documentation of legally applicable events and activities following the terms of a contract or agreement.
- Data Privacy in Blockchain: Blockchain transactions give users power over their data, enabling them to own it, thanks to private and public keys. Third-party intermediaries are not permitted to access or misuse data. Owners of personal data can monitor when and how a third party can access it if it is stored on the blockchain.
- Key management: In Blockchain Technology, public key infrastructure (PKI) is used to authenticate individuals and maintain the blockchain’s integrity. For private keys, seeds, and keys stored in external hardware in Blockchain infrastructure, proper Bitcoin wallet protection is needed.
Blockchain has no centralized authority. So, who governs the transactions and ensures transparency?
The answer is Consensus algorithms.
A consensus framework allows the Blockchain network to achieve stability and establish a degree of trust between nodes while ensuring security in the environment. This is why every Blockchain software creation guide and every dApp(Decentralized applications that run on Ethereum)project in the distributed ledger world includes it.
These systems operate based on algorithms that ensure that only validated and legitimate transactions are included in the public transparent ledger. This eliminates the issue of double-spending.
- It guarantees the Blockchain’s fault tolerance, consistency, and dependability. That is, even in the face of failures and challenges, the regulated mechanism will continue to function.
- It helps to align the economic interests of all the participants.
- The protocols built into the Distributed blockchain network ensure that the data used in the process is correct and up-to-date, as well as the state of the public ledger.
- It also helps make the Blockchain equitable.
- A strong consensus mechanism means that every node in the network takes part in the voting process.
Cryptography in Blockchain
Cryptography is used in a variety of ways in blockchain technology, including wallets, transfers, authentication, and privacy-preserving protocols.
A Cipher is an algorithm used to achieve the process i.e convert plaintext to ciphertext.
A small amount of information needed to induce the cryptographic algorithm’s output is referred to as a key.
Types of Cryptography:
- Symmetric-Key Cryptography–Symmetric encryption is a form of encryption in which electronic data is encrypted and decrypted using only one key (a hidden key).
- Asymmetric-Key Cryptography-Asymmetric cryptography, also known as public-key cryptography, encrypts and decrypts a message and protects it from unwanted access or use using a pair of related keys — one public key and one private key.
- Hash Functions-Keys aren’t used with this form of encryption. It generates a hash value of a fixed length from plaintext using a cypher. The contents of plain text are almost difficult to retrieve from the ciphertext.
What are the advantages of Cryptography?
- Authentication-MAC and digital signatures are cryptographic tools that can secure information from spoofing and forgeries.
Here, MAC refers to a message authentication code, also known as a tag, as a short piece of information used to authenticate a message — that is, to validate that the message originated from the specified source and has not been tampered with.
2. Non-repudiation-The digital signature offers a non-repudiation service to protect against any disputes that may occur as a result of the sender’s refusal to move on a letter.
Nonetheless, Cryptography has its disadvantages.
- Also for a legal person, accessing strongly secure, authenticated, and digitally signed information at a critical moment of decision-making may be challenging. An attacker will target the network or computer device and make it non-functional.
- Cryptography cannot even be used to achieve partial access protection. Administrative controls and protocols must be implemented in this case.
- The use of cryptography cannot guarantee high availability, which is a central feature of information security. Other methods are needed to protect against threats such as denial of service or total system failure.
Cryptoeconomics
What is Cryptoeconomics?
Cryptoeconomics, according to Ethereum creator Vlad Zamfir, is:
“A formal discipline that studies protocols that govern the production, distribution, and consumption of goods and services in a decentralized digital economy. Cryptoeconomics is a practical science that focuses on the design and characterization of these protocols.”
Cryptoeconomics refers to the application of cryptography, computer networks, and game theory to provide stable and autonomous mechanisms that depend on a range of economic rewards to sustain themselves.
Blockchain may be a very secure network. However, there is no denying that even the safest networks can be compromised. Hence, Blockchain Security is an escalating requirement.
References:
- What are Smart Contracts? https://youtu.be/eJX4y3qmViI
- How Blockchain will transform the economy:https://www.youtube.com/watch?v=RplnSVTzvnU
- Introduction to Crypto Economics:https://www.youtube.com/watch?v=pKqdjaH1dRo
- What is Cryptoeconomics?https://www.youtube.com/watch?v=9lw3s7iGUXQ
- Blockchain Security explained: https://www.youtube.com/watch?v=5XtvHJbq5kw
- What is a 51% attack? https://www.youtube.com/watch?v=BuTj9raHQOU
