If you’re involved in Bitcoin and cryptocurrencies in any way, shape, or form, then there’s a good chance you want to protect your digital assets. Cybersecurity is a legitimate concern in today’s world, especially as cyber attacks seem to continually be on the rise.
Some people turn to blockchain for their cybersecurity needs in an effort to secure their crypto. However, blockchain is still in its nascent stages, which begs questions about the technology’s integrity and security.
This is why we want to take the time to discuss blockchain security and how it works. You may not know it, but large companies like Walmart, FedEx, IBM, and others use the blockchain. If nothing else, that should reassure you of the security and safety behind the technology.
Let’s start with a quick review of what the blockchain is. A blockchain is a shared ledger designed distribute confidence and trust in a decentralized environment. It is replicated and shared across the network, made up of nodes.
As a result, all computers on the system can maintain, record, and see all transactions that take place on the blockchain. When a preset number of transactions are gathered and stored on the ledger, they’re put into a block and attached to the already existing chain of data. Thus we get the term “blockchain.”
Now that we’ve defined the blockchain, we can move on to blockchain security. This technology is a risk management tool used for networks that rely on the blockchain. Organizations integrate assurance features, cybersecurity platforms, and other cutting-edge technologies using the blockchain to reduce the chances of cyber hacks, fraud, and other digital attacks.
The blockchain has built-in security capabilities that make it one of the most protected technologies available. This is due to the consensus, decentralization, and cryptographic principles on which the technology is built. For example, every new block that’s created and added to the blockchain is connected to previous blocks using a method that makes the entire chain tamper-proof.
Additionally, any transaction that takes place on the blockchain has to be verified, which is done through a consensus mechanism. This is where all nodes on the network agree that each transaction is legitimate, which keeps the blockchain accurate and trustworthy.
Because of its consensus mechanism, the blockchain doesn’t have a single point of failure. However, it also doesn’t have the ability to change records or transactions. Once a transaction is verified and confirmed, it’s immutable.
One of the advantages of the blockchain is the option to choose between different types of blockchains. Each type offers distinct features and capabilities.
The key aspect of a public blockchain is transparency. These types of blockchains focus on providing as much accountability as possible, which encourages nodes in the network to participate in consensus and validation.
Since the blockchain is decentralized, anyone on a public blockchain can participate in validating transactions. Plus, the software associated with a public blockchain is open-source and available to anyone who wants to use it. Popular public blockchains include Bitcoin and Ethereum.
The primary characteristic of a blockchain that is open to the public is its decentralized nature. This is used to ensure everyone on the network is participating and make the blockchain as distributed as possible. That means no centralized authority or singular point of control exists within a public blockchain.
A blockchain’s decentralization relies on its consensus mechanism, its governance, how it distributes ownership, and how it incentivizes its participants. For example, Bitcoin uses a process called “mining” to reward its nodes. Miners aid in the validation process and, as a result, earn Bitcoin when they’re the ones to successfully complete a block on the chain.
Along those same lines, governance can cover a wide variety of activities, including who has access to the consensus mechanism and who can participate and vote in project suggestions or advancements. Even though participants could be restricted from certain activities, anyone can join the network and confirm and verify transactions, which is the most significant difference between public blockchains and their private counterparts.
By comparison, a private blockchain is just that - a network that requires users to have an invitation to access it. However, since participants must be invited, the network has a central authority that confirms or denies user permissions. This is ideal if you’re using the blockchain for your business, as you can provide your network administrator the control they need to create a permissioned platform.
These types of permissioned networks restrict who has the ability to participate in a blockchain along with what types of transactions they can perform. Regardless, anyone who wants to join a private blockchain needs to have an invitation or be given permission to join it.
Typically, private blockchains are used by business organizations looking for secure environments through which they can perform secure and safe transactions. These tasks can be used for authentication, accounting, determining access, providing records, and much more.
Last on our list of types of blockchains is the consortium blockchain. You don’t usually see this type of blockchain when discussing public and private blockchains, but consortium blockchains serve their purpose.
These “hybrid” blockchains consist of preapproved participants designated to validate and verify transactions on the network. These semi-permissioned networks are partly decentralized, having both a decentralized nature yet allowing a central authority to maintain control.
Companies that prefer to use consortium blockchains are those that specialize in supply chain management, banking, accounting, or the Internet of Things (IoT).
When you use the blockchain, you’re using a technology that offers a wide variety of security measures and benefits. Solutions developed on the blockchain offer a platform that’s difficult to exploit. As a result, blockchain technology offers the security you or your company needs.