Blockchain Technology
What Is Blockchain Technology
Blockchain technology is an advanced database that is shared across a network of a computers nodes and enables transparent exchange through a business network. It is a system of recording information that is impossible or difficult to hack or change. You can use blockchain technology to track your order payments or other transactions, thereby preventing unauthorized transaction entries.
Blockchain technology isn’t just limited to cryptocurrency. It can be used to make any industrial data immutable. Blockchain is well-equipped to navigate the evolving landscape of cybersecurity across domains.
Why Is Blockchain important
Information is the main source of business in the modern world. Businesses are better off the faster the data is available and accurate. Blockchain creates a ledger between buyers and sellers. Through this, all transactions are approved by both parties and updated correctly in both their ledgers at the right time. No one except authorized network members can access it. Blockchain technology is leading the way in various sectors in today’s world, including the creation of digital currencies like Bitcoin.
How does a Blockchain work
When someone accesses or changes data on a blockchain, it gets recorded in a “block” along with other transaction records. The system encrypts these stored transactions using unique permanent hashes. Instead of overwriting old data blocks new ones link to them forming a “chain.” This setup allows people to keep an eye on any changes.
These chunks of coded information are forever linked together. The system logs transactions one after another without end. This creates a flawless record that shows how the blockchain has changed over time. You can look back at earlier versions of the blockchain too.
When fresh data joins the network most nodes need to check and agree on its authenticity. They do this based on permissions or financial incentives also called consensus mechanisms. Once everyone agrees, they create a new block and add it to the chain. Then, all nodes update to show the latest blockchain record.
In a public blockchain network, the first node to prove a transaction’s legitimacy in a credible way gets a financial reward. People call this process “mining.”
Here’s a made-up example to show how blockchain works. Think about someone wanting to buy a concert ticket from a reseller. This person got tricked before by someone selling a fake ticket so she decides to try one of the blockchain-powered ticket exchange websites that have popped up. These sites give each ticket a unique identity that can’t be changed and is easy to check. This identity links to a real person. Before the concertgoer buys her ticket, most of the computers on the network check the seller’s info making sure the ticket is real. She buys her ticket and has a great time at the concert.
Key Elements of Blockchain
Here are the key parts of blockchain structure:
A distributed ledger :
A distributed ledger serves as the shared database in the blockchain network to store transactions similar to a shared file that all team members can edit. While most shared text editors allow anyone with editing rights to erase the entire file, distributed ledger technologies have rigid guidelines about who can make changes and how to make them. Once entries have been recorded, you can’t delete them.
Smart contracts:
To make transactions faster, a set of rules called a smart contract is stored on the blockchain and runs . A smart contract spells out conditions for corporate bond transfers, includes terms to pay travel insurance, and covers much more.
Immutable records:
Nobody can alter or mess with a transaction once it’s been added to the shared ledger. If a transaction record has a mistake, someone needs to add a new transaction to fix the error. Both transactions will then be visible to everyone.
What are the types of Blockchain Network
There are many types of blockchain technology. Most of them:
Public blockchain networks:
A public blockchain allows anyone to join and take part, with Bitcoin being a prime example. However, this type of network has its downsides. It needs a lot of computing power, offers little to no privacy for transactions, and has weak security. Companies must think about these issues when they consider using blockchain for their business.
Private blockchain networks:
One organization controls private blockchains also known as managed blockchains. This authority decides who can join and what permissions they have in the network. Private blockchains aren’t decentralized because they limit access. Ripple, a digital currency exchange network for companies, serves as an example of a private blockchain.
Hybrid blockchain networks:
Hybrid blockchains mix features from private and public networks. Businesses can create private, permission-based systems next to a public system. This way, they control who sees certain data in the blockchain while keeping other data open to all. They use smart contracts to let public users check if private deals have gone through. For instance hybrid blockchains can open up digital money to the public while keeping bank-owned money private.
Consortium blockchains:
Several organizations can share the duty of maintaining a blockchain. These pre-chosen groups decide who can submit transactions or access the data. A consortium blockchain works well for businesses when all members need permission and share responsibility for the blockchain.
What are the benefits of Blockchain technology
Lower compliance costs and less risk:
Banks depend on “know your customer” (KYC) processes to onboard and keep customers. But many current KYC processes are old and cost banks up to $500 million each year. A new DLT system might need just one KYC check per customer. This could boost efficiency, cut costs, and make things clearer and better for customers.
Advanced security:
Blockchain systems offer the high level of security and trust that today’s digital transactions need. People often worry that someone might mess with the underlying software to create fake money for themselves. But blockchain relies on three key ideas – cryptography, decentralization, and consensus – to build a super-secure software system that’s almost impossible to tamper with. The system has no single weak point, and no single user can alter the transaction records.
Accuracy of the Chain:
Thousands of computers and devices approve transactions on the blockchain network. This process takes away all human involvement in verification, which leads to fewer mistakes and a precise record of data. If a computer on the network happens to make a calculation error, it would affect one copy of the blockchain. The rest of the network wouldn’t accept this mistake.
Efficient Transfer:
Transactions placed through a central authority can take up to a few days to settle. Let’s say you put a check in the bank on Friday night. You might not see the money in your account until Monday morning. Banks are only open during the week for five days. But a blockchain doesn’t sleep. It’s working all the time, every day of the year. This means you can move your money any time you want even on weekends or holidays. Some blockchains allow users to complete transactions within minutes and consider them secure after just a few. This feature proves helpful for cross-border trades, which typically take much longer due to time zone differences and the need for all parties to confirm that the payment has been processed.
Improved efficiency:
B2B deals can eat up a lot of time and create workflow jams when you have to deal with compliance and outside regulators. The see-through nature of blockchain and its smart contracts speed up these business deals and make them more effective.
Decentralization:
Blockchain doesn’t keep its data in one place. Instead, it copies and spreads the blockchain across a computer network. When someone adds a new block to the blockchain, every computer in the network updates its copy to show the change. Spreading information across a network rather than storing it in a single central database, makes the blockchain harder to mess with.
Faster auditing:
Companies need to create, share, store, and rebuild electronic transactions in a way that can be checked. Blockchain logs are unchangeable in time order, which means all records always stay in the order they happened. This clear view of data makes checking much quicker.
Blockchain Security
People often say blockchain is “unhackable”. But 51% attacks let bad guys take over more than half of a blockchain’s computing power and mess up the shared record. While this kind of attack costs a lot and isn’t easy to pull off, the fact that it worked means security experts should see blockchain as a helpful tool—not a cure-all for every problem.
The 51% attack exploits what people call the 51% problem: “If one group controls 51% of a mining pool, they can fake an entry in the blockchain. This lets them spend money twice and even split off a new chain that benefits the mining pool.”
Public and private blockchains, the two main types, provide different security levels. Public blockchains “use computers connected to the public internet to validate transactions and bundle them into blocks to add to the ledger. … Private blockchains, on the other hand permit known organizations to join.” Public blockchains allow any organization to join, which might not suit enterprises worried about keeping information confidential as it moves through the network.
Another contrast between public and private blockchains relates to how they handle participant identity. Public blockchains “are built on the idea of anonymity. … A private blockchain uses a permissioned network where known users check the transactions through a process called ‘selective endorsement.’ This approach benefits businesses because users with the right access and permissions can update the transaction ledger. While this method still has some problems, like risks from insiders, a secure setup can solve many of these issues.”
Blockchain technologies are booming at a rapid pace and have an impact on new ideas for everything from shared storage to social networks. From a security standpoint, we’re entering uncharted territory. As developers build blockchain applications, they should prioritize securing their blockchain apps and services. Activities like conducting risk assessments setting up threat models, and doing code analysis should all be part of a developer’s blockchain application plan. This includes static code analysis, interactive application security testing, and software composition analysis. To ensure a successful and secure blockchain application, it’s crucial to build security in from the get-go.