What is Blockchain Technology & is it Secure ?
At its simplest, a blockchain is a digital ledger of transactions. When someone makes a transaction — whether it’s buying a good, sending money to another person, or requesting access to information — that transaction is then recorded and verified on the ledger. Once it’s been verified, the transaction cannot be changed or altered in any way.
This may not sound like much, but this simple system can have major implications for both individual users and businesses. For individuals, blockchain offers greater security and privacy when making online transactions. And for businesses, blockchain can help streamline processes, reduce costs, and speed up transactions.
But how does blockchain work? Let’s take a closer look.
A digital ledger is a digital record of all transactions or other events that have taken place in a particular system. This could be, for example, a financial ledger that records all transactions relating to a company’s finances, or it could be a log of all events that have occurred on a particular computer system. In some cases, the term “ledger” may also refer to the book in which such entries are recorded.
In the case of blockchain, the digital ledger contains every transaction that has ever taken place in the network, and is constantly growing as more transactions are added.
Each new transaction is verified by the network before being added to the ledger, making it virtually impossible to falsify or tamper with data.
Let’s understand further.
A blockchain is a distributed database that shares transactions in a decentralized manner. This means that instead of having one central authority, like a bank, there are many different parties involved in processing transactions. When someone wants to make a transaction, they send it to the network and it gets verification from multiple nodes, or computer systems, before being added to the shared ledger.
This process allows for transparent transactions without the need for a third party. Each transaction is also linked to the previous one through cryptographic hashing, which creates an unbroken chain of blocks. This makes it impossible to go back and alter previous transactions, meaning that blockchains are immutable.
At its core, blockchain is a distributed database that allows for transparent and tamper-proof recordkeeping. Transactions are grouped into “blocks” which are then chained together to form a “chain.” This chain of blocks acts as an immutable record of all transactions that have taken place on the network. Because each block references the previous one, it is almost impossible to alter or delete transaction data without invalidating subsequent blocks in the chain.
Blockchains have many potential applications beyond simply cryptocurrencies.
What is cryptocurrency?
A cryptocurrency is a digital asset designed to work as a medium of exchange that uses strong cryptography to secure financial transactions, control the creation of additional units, and verify the transfer of assets.
Bitcoin, the first and most well-known cryptocurrency, was created in 2009. Since then, hundreds of different cryptocurrencies have been developed.
Cryptocurrencies are generally built on blockchain technology — a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them immune to government interference.
What is the difference between blockchain and cryptocurrency?
For many people, the terms “blockchain” and “cryptocurrency” are interchangeable. However, there is a big distinction between the two concepts. Blockchain is the underlying technology that enables cryptocurrencies to exist, while cryptocurrency is just one application of blockchain technology.
The difference between blockchain and cryptocurrency is like the difference between the internet and email. Both are separate technologies that are often used together, but they serve different purposes.
Blockchain is a distributed database that allows for transparent and tamper-proof recording of data. Cryptocurrency is a digital asset that uses cryptography to secure its transactions and to control the creation of new units. Cryptocurrencies are built on top of blockchain technology and use it to track their movements and transfers. In this way, blockchain provides the infrastructure for cryptocurrencies, while also allowing them to function in a decentralized manner.
Is blockchain technology secure?
The blockchain technology has a number of advantages over traditional ones.
Firstly, it is much harder to cheat the system — since all transactions are public and verifiable, anyone trying to defraud the network would be quickly caught out.
Secondly, it is much more efficient than traditional ledgers, as there is no need for a central authority to validate and record transactions.
Blockchain technology is incredibly efficient when it comes to preventing fraudulent transactions. However, it’s not as secure when it comes to protecting user data.
Blockchain technology is often heralded as the most secure way to store and transmit data. The reason for this is that blockchain data is distributed across a network of computers, making it virtually almost impossible to tamper with. Furthermore, each transaction on the blockchain is secured with a cryptographic signature that can be verified by any member of the network.
That said, no technology is perfect or un-hackable, and blockchain is no exception.
In fact, there have been several notable attacks on blockchain-based systems in recent years.
The most famous of these was probably the attack on the DAO in 2016. The DAO was a decentralized autonomous organization built on top of the Ethereum blockchain. It was attacked by a hacker who exploited a flaw in its code to siphon off millions of dollars worth of ethers.
The DAO was hacked due to vulnerabilities in its code base.
While this incident showed that blockchain systems are not immune to successful cyber attacks.
Furthermore, if someone were able to gain control of more than half of the computers on a blockchain network (a so-called “51% attack”), they could tamper and change the information stored on the blockchain, and modify the “consensus” or result. If you’re not familiar with the term, a 51% attack is a cyber attack that takes control of a blockchain by getting 51% or more of the network’s mining power or staking units. This allows the attacker to double-spend coins, prevent new transactions from being confirmed, and halt all activity on the network.
Essentially, it gives them full control.
The threat of a 51% attack is very real and has already been carried out numerous times on smaller cryptocurrencies. In January 2019, for example, Ethereum Classic (ETC) fell victim to a successful 51% attack.
On the other hand, if someone’s personal information is stored on a blockchain, that information could be accessed by anyone who has access to the blockchain, if the keys encrypting and protecting the information are not protected efficiently.
As a result, individuals need to be careful about what information they choose to store on a blockchain. There are a number of ways to protect your cryptocurrency, for example from cyber attacks, and it requires YOUR awareness and implementation. One of the most important things you can do is choose a strong password with two-factor-authentication for your wallet and never share it with anyone. This adds an extra layer of security.
Another good way to protect your cryptocurrency is to store it offline in a cold storage wallet. This reduces the risk of malicious actors being able to access your funds, as they would need physical access to the wallet in order to do so.
Lastly, several privacy issues arise with the usage of the blockchain technology. According to Articles 16 and 17 of the GDPR, the GDPR assumes that data may be altered or deleted in order to meet legal obligations. Blockchain technology, on the other hand, make it difficult for anybody to alter the data in order to maintain the integrity of the network and to build confidence.
There are a few key issues with blockchain that need to be addressed in order for it to be widely accepted and adopted. Firstly, there is the issue of cyber security and hacking. Because blockchain is decentralized and distributed, it is a prime target for malicious actors who can attack the network and try to steal information or funds. Secondly, there is the issue of privacy. Because blockchain is a public ledger, all transactions are stored on the network and can be viewed by anyone. They are also by nature immutable, while privacy laws require access to change, update and delete personal data. This lack of privacy can deter some users from using blockchain-based applications or services. Lastly, there is the issue of scalability. Because each block in a blockchain contains data that needs to be verified by every node in the network, the more transactions that occur on the more nodes will be required.
The blockchain is a powerful tool, and it’s important to remember that like any technology, it can be used for good or bad. As more and more businesses adopt the blockchain, it’s essential to make sure that your data is protected by hiring a cybersecurity professional.
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By Magda Chelly
Chief Security Officer | TEDx Talk | Author & Keynote Speaker | IFSEC Global Top 20 Cybersecurity Influencer | Entrepreneur | PhD, S-CISO, CISSP, Cert SCI (General Insurance)
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