The concept of blockchain, decentralization, and cryptocurrencies all started when Bitcoin made its debut in 2009. Back in the day, it was called the modern way of doing finance and making transactions, and after some time, Bitcoin was called digital money; the very term ‘cryptocurrencies’ was coined later on when many other crypto tokens working on the same principle of decentralization on which Bitcoin stands were introduced. All cryptocurrencies out there in their most present form have one thing in common, and that is decentralization and blockchain technology.
The working of blockchain technology is not at all difficult to comprehend. Think of it as a vast database that is run by multiple nodes around the world that act in harmony and unison with each other to record each and every transaction that is taking place on the platform in the form of consistent blocks. These nodes are actually people that are staking their computational powers for the sake of validating transactions taking place for a dedicated cryptocurrency and getting rewarded in turn.
Concept of Blockchain
Every cryptocurrency has its own blockchain and, therefore, its own validators or miners that will validate the transactions, interpret the data in the form of blocks and place the blocks in a successive manner onto the blockchain. To validate a transaction on the blockchain, all the nodes out there must reach a consensus that the transaction is indeed valid, unique, and original. Blockchain acts as a digital ledger that is public, and therefore all the transactions that are recorded on it are tangible.
Working of Blockchain Technology
Once a block has been formed in events of the validation for a dedicated transaction, the data it has is communicated instantly across all the nodes, and they will update themselves accordingly with the most recent and correct data. Once a block has been formed, there is no changing it or the information that it carries rich verifying the integrity of blockchain technology for securing information and its immutable nature, which is exactly what’s required from the concept of decentralization in the first place.
It is safe to say that blockchain technology is intended for people who don’t trust each other and are not willing to pay for an intermediary or a broker to carry out a deal between them. Hence they prefer doing business on a blockchain where things are autonomous, and contracts are drafted digitally that are not prone to change once the ink has dried on them.
In case a user wants to verify if a transaction they made on the blockchain technology actually got through or not, they can verify it over the public records of the blockchain. All they would have to do is to enter the hash number of the transaction, and all the data pertaining to it will be made available, but only most of it redacted. The redaction of data is to ensure that the information of the sender and receiver remains anonymous, which is why blockchain technology has become a top interest among people of all ages and backgrounds.
Purpose of Cryptocurrencies
It might sound almost paradoxical, but the very purpose of cryptocurrencies was to put forward a system that is consistent, efficient, and safe from the intervention of the state or governmental control, plus the hopes of eliminating exchange rate issues was also something that cryptocurrencies were based on.
Cryptocurrencies were initially introduced as a modern financial technology that would make performing transactions on a global scale cheaper, faster, and secure than ever. It will be leading funds directly into the hands of the concerned parties, thus taking away any and all intermediaries or brokers of all kinds. Another hope that was critically adored back then was to eliminate the burden of governmental regulations which are imposed on monetary institutes and organizations as a way of controlling their operation.
Cryptocurrencies are purely decentralized, which means that no government, state, or single person has any say or control over the transactions that are taking place; these are absolutely anonymous. Blockchain technology and its usage is not only limited to financial institutions as now it is finding its use case diversified in other sectors of life, including identity protection, development of a decentralized economy, increasing the security of the data, and providing a means for storage of personal data securely behind the cryptographic encryptions that are almost impossible to crack.
Nowadays, cryptocurrencies and blockchain technology are finding their use among the development of digital identities, digital passports, and inclusion of personal data of the user on digital Ledger which is controlled and secured by the same algorithms that protect cryptocurrencies, thus making it immutable.
Is Blockchain Technology Really Secure?
If you want to take into account the overall security of blockchain technology, then you have to take into account how data is stored on blockchain technology in the form of blocks. Once a transaction is validated, the data that it generates is enclosed within a block that has a dedicated hash number on it; this hash number acts as an identifier and links the present block to the previous one and the one that will be coming after that.
Once a block has been generated, the data that it proposes cannot be changed or replaced. Even if under odd circumstances an anomaly is registered, then all the nodes of a dedicated blockchain will verify the context of the data and remove the affected block immediately. Following are some of the most dedicated ways using which security of the blockchain technology is kept intact;
All crypto transactions taking place on a blockchain are secured and encrypted using cryptographic algorithms, which means that it is the safest form of encryption out there that diminishes the possibility of a hack or compromising of data. Each and every block present on the blockchain has a private key that can be verified with a public key, and if tampering of any sort takes place, then basically both keys won’t match, and blockchain in that specific event will completely destroy and remove the block from it along with it the very foundation of a compromise.
Another vital aspect of the security of blockchain technology is decentralization. Blockchains are completely decentralized and distributed, which means no single entity, person or organization has any control over the transactions that take place or the data that is administered onto the blockchain.
There are only a limited number of nodes out there carrying the burden of validating the transactions and other aspects of cryptocurrencies which makes the possibility of a hack or other such criminal activity extremely negligible. But in rare instances, even if there is a hack or a similar activity, then only the node to which the hack was pointed towards will get affected, and it won’t trouble other nodes as these will continue to function normally in their own instance. This definitely takes power away from the hackers and cybercriminals and strengthens the overall security of the blockchain network.
The last but not least element which ensures that blockchain technology remains secure and efficient in its operation is consensus. All the nodes in charge of managing the operation of a dedicated blockchain must reach a consensus for a dedicated transaction, ensuring that it actually took place, is genuine, and crosschecked from all these nodes. After a consensus is reached among these nodes, the transaction will be recorded onto a block and finally embedded into the blockchain.
These are the security details that make sure that blockchain remains as secure as it could be. There are still a few challenges that need to be sorted with blockchain technology in terms of regulations, compliance, and government enforcement. As cryptocurrencies and blockchain technology are public and distributed which means anyone with access to the Internet and a computer can access blockchain technology for the sake of sending funds or making transactions.
This esteemed property or element of blockchain technology has been used in the past illegally for the sake of money laundering and other illegal activities. That is why regulatory issues are still piling up for blockchain technology, and these require clarity over how blockchain technology wishes to comply with know your customer and anti-money laundering policies.
As the adoption of blockchain technology is being carried out at a consistent rate and it is being adopted by financial enterprises and organizations from all over the world, it is believed that these lingering issues might get solved sooner than later.
Use Cases for Blockchain Technology and its Security
When people listen to blockchain technology, they immediately go towards financial enterprises and organizations using the technology for the sake of streamlining the transactions to send or receive money, but it is so much more than that. The full essence of blockchain technology could be grabbed from the fact that it can be used to enhance the security of multiple areas of life and not just the financial entities. It can be used to store information, guard individual data of the users, and keep digital assets that are far more precious in a decentralized manner that can only be accessed by the intended individuals.
Currently, blockchain technology is facing multiple challenges regarding digital transactions, and some of these are double-spending, data security and frauds, cross-border transaction, and currency reproductions. These challenges are being talked over on multiple forums, and hopefully, these will get sorted as blockchain technology sees a massive boost in adoption and up-gradation of the technology, including the program that runs and makes blockchain technology secure. Following are some of the instances the security of the blockchain technology could be put to handsome use;
- Protecting Sensitive Information
When it comes to protecting the integrity of sensitive information, there is no better alternative than blockchain technology. The identity of a user and its authentication through blockchain technology could help the banking sector get ahead in terms of security and efficiency. If there is any kind of illegal activity that is going on, then it can promptly be spotted with the help of blockchain technology which would enable financial institutions to use smart technologies to dial down the person or group responsible for breaching the security while keeping all information and assets on a blockchain intact.
Blockchain technology could also help in authenticating the users and devices without the need for standard password protection. Consensus could be generated through a decentralized network of nodes, and verification of a dedicated user trying to access their cryptocurrencies or digital could be done via SSL certificates that originate from blockchain technology. If a digital asset or a piece of information lives on a decentralized network that verifies the quality of transactions through blockchain verification, then the implementation of a hack or a malicious attack is rendered impossible.
- Enhancing the Security of the IoT Devices
IoT or the Internet of devices is a new concept but is gaining popularity slowly and greatly. As the Internet of Things relies on the Internet for safe communicating with each other, the possibility of a hack or a malicious activity is significant.
Enhancing the security of these devices via blockchain technology can help in eradicating any possibility of a hack or malicious activity in the future because all the communication between these devices would then take place in a peer-to-peer fashion. And if you throw two-factor authentication done by blockchain technology into the mix, this will further strengthen the structure of the network and make it digitally impossible to penetrate.
- Securing the Internet Communications in Real-Time
Any type of communication taking place on the Internet is encrypted using the most basic technologies out there, which don’t necessarily mean that the information has been rendered secure.
If all Internet communications are to be encrypted using blockchain technology, then the possibility of a data leak or manipulation of sensitive information would get discarded and permanently removed from the equation. End-to-end encryption, as the general Internet provides, doesn’t cover the metadata of dedicated assets or information classes which means that there is always a possibility of data getting compromised.
- Removing the Need for Passwords
Have you ever wondered why we use passwords for everything? It has become an absolute necessity to create multiple passwords for multiple websites, emails, and other dedicated digital media, and then remembering them is purely frustrating.
With the deployment of blockchain technology, businesses as well as websites and other digital media entities, would be able to authenticate users and their devices without requiring a password at all. This completely removes any manual input a human can provide in terms of authenticating the user, thus removing the whole aspect of hacking or other malicious activity.
Blockchain technology would be able to verify the authenticity of a user via peer to peer interaction, and it would also become apparent if someone else is trying to compromise the information for that dedicated user because nothing on the blockchain can be duplicated and just hid under the carpet because all the nodes working in harmony have to reach a consensus or otherwise it just won’t go through.
- Redefining Privacy and Security of the Social Media
There is an extremely long debate churning up within the crypto community about the development of decentralized social media. The social media of the present comprises channels that are not properly secure and have a centralized oversight on all ends. The ads that are shown and the money that is collected from advertisers and marketers directly go into the pockets of the social media chains, whereas users are the driving force behind the success of these ads and any advertising campaign run through any social media platform.
With the initiation of decentralized social media, users will be put in charge of running ads and getting paid for viewing or interacting with these ads, plus the whole concept of management and communication for these social media platforms would also become decentralized instead of having a centralized Control Center.
The social media platforms such as Facebook, WhatsApp, Viber, or any other social media entity out there are using simple security metrics and end-to-end encryption, which won’t deflect an eccentrically designed hack or malicious attack because of the incompetence of these basic security metrics.
As explained earlier end to end encryption is not the answer because it doesn’t take away the implications that can be made to the metadata of a dedicated digital asset or, in this specific instance, the communications that are taking place via these conventional social media platforms. But if this whole thing is to be viewed in the context of blockchain technology and decentralization, then all the Internet communication that takes place would be channeled through distributed Ledger, which will consistently reduce any risk of surveillance, thus giving the right of privacy back to the user.
People won’t be submitted into giving away their mobile phones or email addresses, thus securing their privacy and enhancing it. Any and all verification that is required could take place on the blockchain technology without the need of an intermediary or broker, which in this case are email addresses and telephone numbers. Blockchain technology can help in preventing identity theft, protect the data against any kind of tampering or manipulation, and therefore enhance the security of any and all processes or systems out there.
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