You might have heard about some Blocks, Nodes, and Chains - but what does it have to do with blockchain, bitcoin and it's security. Is blockchain technology safe? Learn about what makes blockchain technology safe.
While Bitcoin has had many dips and surges in its value since its inception in 2009, the underlying technology behind the cryptocurrency has been touted as being extremely secure. But what is it about blockchain that makes it so secure, to the point that it’s attracted the attention of big players in the financial industry?
To answer this question, let’s first recap the definition of a blockchain. As the name suggests, it is a sequence of packages of transaction records that are referred to as “blocks”. Each block is connected to the one before it, creating the “chain”. You can think of this as an accounting ledger that keeps a history of every transaction ever made on the blockchain.
This ledger has multiple copies of it stored on a network of computers, called “nodes”. Whenever there is a new block submitted to the ledger, it is verified by these nodes to make sure that the transaction is legitimate and valid. The nodes and the people involved have private keys tied to these transactions, so if there is any attempt to tamper with the record, everyone on the network will know about it and the keys will become invalid.
Because no one party controls this information, the decentralized nature of the blockchain makes it much more difficult for people to make fraudulent transactions.
You can actually track and trace all Bitcoin transactions as it is completely transparent. With this information accessible and secure, anyone can check the balance of a public address and view transactions details by using blockchain explorers. We have been explaining previously some of the things you can look up on the blockchain using the Blockchain Explorer tool.
Access to data provided from the block explorers has proven invaluable for analysts and investors and the continued efforts to keep cryptocurrency secure for all users.
Another aspect of this technology that makes it almost impossible to hack is the cryptographic fingerprint each block has. This is commonly referred to as a hash, where an algorithm is applied an initial piece of data or value to output a new value or ID.
This is not unlike how your passwords are protected on online platforms, except that each block not only has a has derived from its own transactions, but it also has the hashes of the block preceding it. In order to change or fake the block’s data in any way after the fact, you would essentially have to do the same thing to every block in front of it, which is to say, the entire block chain itself.
As difficult as hacking or cheating a system like this is, it does not mean that it hasn’t been done before, or that there aren’t theoretical flaws with blockchain.
When new blocks are added to the blockchain, the transaction data is checked by the nodes in the system to verify its legitimacy. If it matches the data that the nodes have on their own computers, then it is deemed valid and added to the chain. However, this check only needs a 51% consensus in order to be valid.
This means if there was a group of individuals colluding together to control more than half the nodes in the network, they could effectively decide which blocks could be added to the chain, and muscle out anyone else who tried to add their own. This scenario happened for Bitcoin Gold, an offshoot of the original Bitcoin cryptocurrency, in 2018.
Another vulnerability can be found in the ways we integrate blockchain into the things we already use. Blockchain wallets, applications that store private keys for cryptocurrency, can be connected to the internet (referred to as “hot wallets”) or can operate offline (“cold wallets”). Both are prime targets for hackers, especially the wallets owned by online currency exchanges.
A recent example of a crypto exchange being hacked is Bithumb. It estimated to account for 10% of the world's bitcoin trading , March 29, 2019, Bithumb has temporarily suspended all their withdrawals and deposits. Bithumb reportedly hacked again - $13 million In EOS is missing
Blockchain technology has been around long enough for bad players to target its vulnerabilities, but it’s an inherently tough nut to crack that has given cryptography and cybersecurity experts opportunities to develop solutions to current and future threats. Though it may attract the attention of some malicious parties, the work will certainly cut out for anyone who tries to hack blockchain applications.
Without a doubt, blockchain technology is one of the best innovations Bitcoin has brought so far. It’s no secret that the tech industry would dominate the demand for new hires within the crypto job market.
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