Blockchain technology is the bedrock on which cryptocurrencies are built. The technology has also gained application in several areas, such as in supply chains, where its unique features like immutability are of high importance. This very fact has made securing the blockchain network a necessity.
Moreso, there are many blockchain-supported activities that require a substantial amount of transactions every second, so maintaining a safe blockchain network is paramount.
In this blog post, we’ll look at the blockchain, its features, and the role of cryptography in ensuring blockchain security.
What exactly is a blockchain you may ask?
A blockchain is a shared database. This means that the entire information on the blockchain system is disseminated among a vast network of computers, which are referred to as nodes. Information is stored on a blockchain network, typically in digital format through electronic means.
These pieces of information are usually arranged in smaller, orderly formats known as blocks. And until a block is completed, it is not linked to other blocks. The cross-linking of several blocks forms a blockchain. It should be noted that any data input on the blockchain network is permanent and cannot be changed or reversed, which is often regarded as one of the main benefits of blockchain.
The impact of blocks, and by extension, the blockchain technology in the crypto ecosystem, cannot be overemphasized. Apart from being vital in running numerous cryptos, including Bitcoin, its continuity method also ensures that details of digital transactions can be trusted.
Features of Blockchain
A blockchain system has five crucial defining features. They are;
1. Network Distribution
A blockchain runs using a disseminated or distributed network. This means that the responsibilities of validating blockchain transactions are not concentrated in the hands of a central authority.
Rather, the processing of transactions is disseminated evenly among several people, known as nodes. Individual nodes can validate or confirm transaction blocks with no external influence.
This feature helps secure the blockchain as any malicious trade, purchase, or transaction will be easily detected and stopped because of the shared network.
The idea behind this is simple—blockchain transactions are permanent and cannot be altered after validation. Any form of transaction carried out on the blockchain is accurately captured, alongside the time, date, and any additional data connected to the person carrying out the transaction. This ensures that no data can be altered or changed for malicious intents.
3. Consensus Mechanism
For any decision to be made on the blockchain network, there must be a unanimous agreement between all functional parties (nodes) using a consensus model. This ensures that the decisions made are in the best interest of most of the network users.
4. Unique User Signature
Even though the blockchain system is ‘faceless,’ there is a means of identification peculiar to every user — private keys. A blockchain participant has private keys whose codes are known only to them. These keys prevent fraud or impersonation if kept properly, thereby contributing to a secure blockchain.
5. Cryptographic Defense
As previously indicated, changing blocks that have already been recorded on the blockchain network is almost impossible. Cryptography's immutability and dependability combine to make block generation and linking a safe operation. If someone tries to modify the contents of a block, the chain will break, alerting all network nodes immediately. No matter how hard someone tries, the blockchain persistently rejects all hacking attempts.
Cryptography: Its Significance in Sustaining a Secure Blockchain
The history of cryptography can be traced back to ancient times when people first began communicating secretly. Cryptography is an indispensable component of any blockchain network ensuring that a secure blockchain is maintained at every point. The Bitcoin blockchain has gained a reputation and is well known over time to be impossible to hack.
However, cryptography is a crucial backbone behind the high immunity of the Bitcoin blockchain. It ensures that digital money in a user's crypto wallet remains safe and untouched.
How Cryptography Works
Cryptography mainly functions through a process known as hashing. During this process, data of any size is usually entered into an algorithm, and in return, it yields a hash of a predetermined length or size. The algorithm is referred to as a hash function.
Every hash is made up of data, and any alteration to the data found within the block will lead to a corresponding alteration of the main block hash.
Every hash comprises two main things; the data contained within the block itself and the data in the block before it. These hash markers are significant players vital to sustaining and securing the blockchain. Every new hash is generated on the backbone of the one before it, which leads to a cross-link between data blocks.
Bitcoin blockchain uses the proof-of-work agreement model. This PoW model functions using an algorithm known as SHA-256. What the code simply implies is that as soon as data is passed into the algorithm, it produces a 256-bit hash that is made up of 64 characters.
Additional Functions of Cryptography
As earlier established, much of Blockchain's success can be owed to cryptography. By ensuring that blockchains are secure, cryptography cements the security of cryptocurrency wallets, where users store their cryptocurrencies and digital money.
A crypto wallet is a must-have for anyone intending to participate actively in the cryptocurrency market, be it via investing or Bitcoin mining. These cryptocurrency wallets function as a store for a user’s funds and investments, similar to commercial banks.
A form of cryptography, referred to as asymmetric cryptography, is responsible for the generation of both private and public keys that facilitate the receipt and sending out of payments. The private keys are additionally utilized to create unique signatures for each user. These keys serve as a form of identification and confirmation to ascertain the person carrying out the trade.
The cryptographic nature of these keys ensures that only the holder of the key has access to his crypto wallet, making sure the funds are kept safe. The importance of cryptography in securing the blockchain cannot be overemphasized.
Other Factors that Secure the Blockchain
Crypto economics, a rather novel concept, can also maintain blockchain security. This concept is a product of game theory. It is a model used to make decisions with a collection of predetermined rules and rewards. This model is mainly mathematical.
Unlike the conventional game theory, which has a wide range of descriptions, the conduct of nodes across a disseminated computer network is distinctively described as crypto economics.
Crypto economics may also refer to the study of the economics behind the protocols of a blockchain network and the conduct of individual players, including the outcome of their collective input.
This model provides blockchain security through the assumption that since the smooth running of the blockchain is more beneficial for nodes, it will be more helpful for them to be on their best behavior rather than sabotage the network. A good example of this concept is seen in Bitcoin mining.
This is because, by initial design, Bitcoin mining is an expensive process that needs vast amounts of resources and computing power. As a result, this proof-of-work mining consumes a lot of time, energy, and money, irrespective of where, how, and when the mining is done.
Because of the complexities involved in the network, antagonistic conduct is severely frowned upon, while desired behavior is compensated.
As soon as a particular node is noticed to be malicious or shady, such a node will be kicked off the blockchain. Good and competent system nodes also have a high probability of receiving significant rewards for their honest conduct.
This risk-reward equilibrium of nodes will guard against invasions of the network that would negate consensus because the majority of the block hashes are concentrated in the hands of a fraction of the entire network (51% attack).
The 51% attack, mostly considered a blockchain limitation, will only work out if a hacker gains 51% control of the entire network. But, because of the huge volume of participants on the Bitcoin blockchain platform, the likelihood that an attacker will successfully compromise the network is slight, if not impossible.
Aside from that, the computing power required to compromise 51% of the network would be huge and impossible to afford.
It would be a bad idea to spend so much money to gain only a fraction of the money spent to compromise the network. The ability of an online blockchain system to still work despite one or a few nodes becoming selfish is the consensus model used in Byzantine Fault Tolerance (BFT) protocols.
So far as the demerits of sabotaging the network are more than the potential benefits, and as long as the good nodes are continuously recognized and compensated, the blockchain network will last a very long time, devoid of major hitches.
Blockchain has brought about a positive turnaround in the financial world. With the advent of cryptocurrency, especially Bitcoin and Ether, blockchain has massively grown in popularity and use.
So far, the technology has provided top-notch security and decentralization to its users across various networks using a combination of cryptography, crypto economics, and additional mechanisms.
Many crypto projects are being run on blockchain technology, leading to millions of cryptocurrency wallets being supported on the blockchain. The large number of users and the necessity to protect each user’s digital money make securing a blockchain of utmost priority.
*This communication is intended as strictly informational, and nothing herein constitutes an offer or a recommendation to buy, sell, or retain any specific product, security or investment, or to utilise or refrain from utilising any particular service. The use of the products and services referred to herein may be subject to certain limitations in specific jurisdictions. This communication does not constitute and shall under no circumstances be deemed to constitute investment advice. This communication is not intended to constitute a public offering of securities within the meaning of any applicable legislation.