You might think that the term “Blockchain” might only be limited to cryptocurrency. However, it has various applications in other fields such as money transactions, insurance, loans through smart contracts, real estate, voting, storage of personal information, etc.
Blockchain provides security technology for currency exchange. It removes the need for having a central authority for secure transactions. Blockchain significantly increases the speed of transactions. In the US, transactions can take multiple days between two accounts. Blockchain can speed these transactions to take place within a few minutes.
The best thing is that this speed does not come at the cost of security or privacy because blockchains are highly secured. All data stored on the blockchain is encrypted, verified, and completely decentralized. It allows blockchains to stay secure from traditional cyberattacks.
This article focuses on how blockchains are so secure and how they can improve our existing system.
What is a blockchain?
Blockchain is a distributed database that stores information electronically. The fundamental difference between a blockchain and a typical database is that the blockchain stores information collectively in groups called blocks.
When a block gets overloaded with information, it gets linked with the previously filled block. So a chain of the block filled with data is formed. On the other hand, database stores data in the form of tables.
Blockchain can store different data, but its prime usage is as a ledger for transactions. Data entered on a blockchain is irreversible. Any transactions performed on blockchain will be permanent, and its record will be available for everyone to view.
So, we can summarize blockchain as a digital information recorder and distributor. The following method helps in performing transactions on blockchains.
- When you enter a new transaction, the system sends it to a network of peer-to-peer computers distributed across the globe.
- This network of computers then performs complex mathematical operations to solve algorithms and equations to validate the transactions.
- Once the system confirms the transaction’s validity, it clusters the information into blocks.
- The blocks are then chained together to create a long history of transactions. The transaction is complete now.
Usage of Blockchain
People have been working on blockchain as research projects for a long time, but it came into popularity once bitcoin grew in popularity. Since 2009, the use of blockchains grew astronomically once different cryptocurrencies got created.
Bitcoins use blockchains as a way to record all the transactions permanently. In other words, as a ledger of all payments recorded transparently.
Similarly, you can utilize the blockchain in other forms, like records of votes, inventory records, identification records, etc. Thousands of projects are researching how we can use blockchain technology in our society. We can use blockchains in some other way than just doing store transactions.
For example, the hypothetical implementation of blockchain in a democratic election system could eliminate human involvement. It will provide transparent elections, as there will be no chance of tampering.
What makes Blockchains so secure?
Each transaction on a blockchain is encrypted and stored in the form of blocks. When new information gets added to a block, it attaches to the previously filled block, and the chain continues to expand.
For any hacker to steal cryptocurrency from a blockchain, he has to alter the entire blockchain to align with their copy. Supposedly, if he alters an individual copy on a chain, it will differ from the rest of the chain. Similarly, if they change the entire blockchain, it will be different from the record stored in other chains owned by multiple people. Hence, the system will discard the hacker’s blockchain as illegitimate.
For a successful hack, the hacker would have to attempt an attack with a 51% success ratio. It means that they would have to alter the majority of the copies on a blockchain so that such versions become the agreed-upon chain.
Such an attack will require plenty of resources to pull off because they will need to redo the codes for all blocks in the chain. It is also likely that this monumental effort will be a waste of time and resources because such an attempt will not go unnoticed.
If 51% of the blockchain gets altered, it will be visible to all members. Hence, the hacked or altered version of this blockchain will lose all the value, and now the hacker will have control of a worthless asset.
The 51% attack is theoretically possible. However, in practical terms, the hacker would need to reverse engineer the data stored on a block and change the transactions. We know that blockchain stores data in different nodes across the globe.
So, for a successful 51% attack, they will need to reverse engineer 51% of copies of the ledger, which are getting held in different nodes worldwide. You will need quantum computing power which only exists in theory.
How can you steal Cryptocurrency?
Blockchain is virtually impossible to hack due to its contents getting stored on decentralized nodes across the globe. However, you can steal cryptocurrency in other ways. Most of the hacks and thefts in the crypto world occur in crypto wallets, where all the keys are stored. These keys give you control of the cryptocurrency you have in your wallet. These wallets are software applications that get installed on computers or mobile phones.
Any such device that has a connection to the internet can get hacked. If you store your keys in an application that gets installed on a device with internet access, you can hack the wallet and steal your cryptocurrency. It is always advisable to store your keys in cold storage (where there is no access to the internet).
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Frequently Asked Questions
Blockchains are entirely decentralized, which means they are not in control of the central entity. Hence, any government cannot shut it down.
Blockchain is virtually impossible to hack because of its decentralized nature and cryptographic algorithm.
Blockchains are more secure because the record of all transactions is highly encrypted and stored on decentralized nodes. In banks, all records get stored on the bank’s central server, which can be susceptible to cyberattacks.
If you store your keys in wallets that can get installed on a device with a constant connection to the internet, anyone can hack those keys. Eventually, the hacker can steal your cryptocurrency.
You can use blockchains in other applications, including voting systems in elections, any encrypted information storage, loans, real estate, etc.