In 2009, Bitcoin started the Blockchain revolution. It gave people a way to quickly and securely transfer money across the globe. It’s sparked a movement to shift much of our digital information systems onto blockchains.
This initiative is founded on the fact that Blockchain is designed to be immutable and democratic in its essence. Whilst nothing is always 100% secure, Blockchain security benefits from three key concepts.
Data in a Blockchain is disguised, it’s cryptographically ‘hashed’. Complex mathematical algorithms hide the identity of data, similar to password protection.
Every block of data has a unique ‘hash’ that is created from all its previous transactions. This form of ‘hashing’ is impossible to reverse engineer. That is, if someone attempts a fraudulent change, they couldn’t pull it off without invalidating the entire block.
Learn more about the fundamentals of Blockchain, or gain hands-on experience with our CBP (Certified Blockchain Professional) course.
Decentralisation is the way that Blockchain avoids having a single point of failure. A traditional way of sharing or processing information has been to obtain permission from whoever owned the information and then distribute it, ensuring that everyone is aware of the changes that have been made. Distributing information this way involves a long process of verification that can lead to many hundreds of weak points, a bit like a game of Chinese whispers.
Blockchain is decentralised. When a change is made to a piece of information, the entire network, consisting of nodes, validates the change, which is then added into a new ‘block’. This allows for a single version of the truth, without a single point of failure. If one block is changed, all subsequent blocks need to be changed before any new blocks could be ‘mined’.
The downside of having a public code, where anyone can help find vulnerabilities, is that any programmer could effectively hack into the system. These security concerns subsequently cause the development of Blockchain to be very slow. However, because there are so many nodes that verify new blocks, any fraudulent action will be easily spotted.
With a decentralised system, in the absence of a central authority, there needs to be a consensus mechanism, a mechanism by which the network comes to a consensus on particular matters. It functions a little bit like a brain, making decisions for the system.
Before a new block is added to the chain, nodes that validate information compete to verify the block according to the pre-set rules of the Blockchain. If at least 51% of the nodes agree, the new block of data is added.
The node that wins this cryptographic race must produce ‘proof of work’. This deters criminal activity, especially because to do so is very labour-intensive.
Threats to Blockchain security
The ‘proof of work’ consensus model is vulnerable if over 50% of the ‘mining power’ is controlled by a minority of nodes collaborating together. In this case, they can bar other nodes from adding new blocks, maintaining a monopoly.
It’s worth noting that this type of fraud is yet to occur in Bitcoin, one of the most widespread Blockchains, and to do so would require huge amounts of money and labour.
Another issue that surrounds Blockchain security involves the use of ‘smart contracts’ that are set up to execute specific actions only under specific situations. They’re an essential part of many Blockchain initiatives, such as Bitcoin trading and medical records in healthcare systems.
Unfortunately, a team of computing experts have recently analysed one million smart contracts and their findings indicated that approximately 3.4% of smart contracts could be vulnerable to attackers. This is because smart contracts are only as good as the code they’re written in and as such, are vulnerable to hackers. They’re not technically part of the Blockchain, but interact widely with it; much like some centralised institutions such as the centralised currency exchange.
Blockchain is a nascent and still emerging technology that needs to be given a lot of careful thought, especially as more and more of our digital data is being transferred onto it. It is, in essence, a secure and democratic system but that doesn’t mean it’s totally invulnerable.
More people should be using their time and talent in helping to develop the system and making it more secure. The Blockchain development job market is burgeoning.
With our world-class training, you’ll be well on your way to playing a crucial role in the future of Blockchain.