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What makes blockchain secure?
Today blockchain is a buzzword everyone is talking about; it might be related to cryptocurrencies, web3, or metaverse; we all have come across the term. But what exactly is the blockchain, and how safe is it? Let us dig deeper into it below.
What Is a Blockchain?
A blockchain is a distributed ledger that can't be tampered with and is used to validate and store digital transactional records. The upkeep of a Blockchain is not the responsibility of a single authority. Instead, in a peer-to-peer (P2P) network, each computer stores a copy of the ledger, and transactions are confirmed by a decentralized consensus method.
Transactions are saved in permanent blocks, time-stamped units. Each block is linked (chained) to the preceding block by a cryptographic hash generated from the previous block's contents.
Because of the hash linkages, it's difficult to update data in one block without affecting every other block in the chain simultaneously. In practice, this implies that any effort to change or delete data will cause the cryptographic chain to break, alerting all nodes in the network to the problem.
Blockchains are divided into two categories: public and private. Anyone can access the ledger and participate in the consensus mechanism in a public blockchain. The consensus mechanism in a private Blockchain is limited to specific nodes on the network, and views of the private ledger may be restricted as well.
Blockchain was initially designed to support digital currency. Still, it is currently being utilized by a wide range of enterprises as a decentralized database system to enable smart contracts, healthcare records management, and identity and access management (IAM).
What makes blockchain secure?
Several processes, including advanced cryptographic algorithms and mathematical models of behavior and decision-making, are used to safeguard blockchains. The basic framework of most cryptocurrency systems is blockchain technology, which prohibits digital money from being duplicated or destroyed.
The use of blockchain technology in other contexts where data immutability and security are highly valued is also being investigated. The act of recording and tracking charitable gifts, medical databases, and supply chain management are just a few examples.
Blockchain security, on the other hand, is far from straightforward. As a result, it's critical to grasp the fundamental principles and methods that ensure these cutting-edge systems are well-protected.
Immutability and consensus
Although many elements contribute to blockchain security, the ideas of consensus and immutability are two of the most significant. The ability of nodes in a distributed blockchain network to agree on the true state of the network and the authenticity of transactions is referred to as consensus. The so-called consensus algorithms are typically used in the process of reaching consensus.
On the other hand, immutability refers to a blockchain's ability to prohibit transactions from being changed after being confirmed. Although these transactions are frequently associated with the transfer of cryptocurrencies, they can also refer to the storage of non-monetary digital data.
Consensus and immutability, when combined, form the foundation for data security in blockchain networks. Once each new block of data is proven to be genuine, immutability ensures the integrity of data and transaction records. In contrast, consensus techniques provide that the system's rules are obeyed and that all parties involved agree on the present state of the network.
Cryptography's Role in blockchain security
To achieve data security, blockchains rely significantly on encryption. Cryptographic hashing functions are essential in this scenario. Hashing is a procedure in which an algorithm (hash function) consumes any size input of data and returns a predictable and fixed-size output (hash) (or length).
The output will be the same length regardless of the input size. However, if the input varies, the outcome will alter dramatically. However, it does not matter how many times you execute the hash function, and the final hash will always be the same if the input does not change.
These output numbers, known as hashes, are utilized as unique identifiers for data blocks in blockchains. Each block's hash is calculated with the previous block's hash, resulting in a chain of connected blocks. Because the block hash is determined by the data contained within that block, every change necessitates a change to the block hash.
As a result, the hash of each block is calculated using both the data within that block and the previous block's hash. These hash identifiers are critical to the security and immutability of blockchains.
The consensus algorithms used to validate transactions also involve hashing. The Proof of Work (PoW) algorithm on the Bitcoin blockchain, for example, uses the SHA-256 hash function. SHA-256 takes data and generates a hash of 256 bits or 64 characters long, as the name suggests.
Cryptography plays a role in guaranteeing the security of wallets used to hold cryptocurrency units and protecting transaction records on ledgers. Asymmetric or public-key cryptography is used to generate the paired public and private keys that allow users to receive and make payments. To ensure that the coins being sent are truly owned, private keys generate digital signatures for transactions.
The nature of asymmetric cryptography prevents anyone other than the private key owner from accessing funds held in a cryptocurrency wallet, putting the funds in a safe place until the owner decides to use them (as long as the private key is kept secure).
In addition to cryptography, crypto-economics, a relatively new subject, plays a role in ensuring the security of blockchain networks. It's connected to game theory, a branch of research that mathematically simulates rational agents' decision-making in contexts with predetermined rules and rewards. Traditional game theory can be applied to various situations, while cryptoeconomics models explicitly describe nodes' behavior on distributed blockchain networks.
In a nutshell, crypto-economics is the study of the economics within blockchain protocols and the potential outcomes that their design may produce depending on the behavior of its members.
Crypto economic security is predicated on the idea that blockchain systems give nodes more incentives to perform honestly than engage in harmful or defective conduct. Another notable example of this incentive structure is the Proof of Work consensus mechanism used in Bitcoin mining.
Satoshi Nakamoto purposefully intended the Bitcoin mining architecture to be time-consuming and resource-intensive. PoW mining, regardless of where and who the mining node is, requires a significant commitment of money and effort due to its intricacy and computational needs. As a result, such a system creates a substantial disincentive for malicious mining while also providing significant incentives for honest mining.
Dishonest or inefficient nodes will be promptly removed from the blockchain network, while honest and efficient miners will be rewarded handsomely for their efforts.
Similarly, by putting the majority hash rate of a blockchain network in the hands of a single group or entity, this balance of risks and rewards protects against potential attacks that could undermine consensus. These attacks, known as 51 percent attacks, can be incredibly devastating if carried out effectively. Because Proof of Work mining is so competitive and the Bitcoin network is so extensive, the chances of an evil actor getting control of most nodes are incredibly remote.
Furthermore, the computational power required to gain 51 percent control of a massive blockchain network would be prohibitively expensive, giving an immediate disincentive to make such a significant investment for such a modest possible return. The system will prosper without considerable disruption as long as the cost of constructing a majority of malicious nodes remains prohibitive and improved incentives for honest behavior persist. On the other hand, small blockchain networks are vulnerable to majority attack because the overall hash rate dedicated to those systems is significantly lower than that of Bitcoin.
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