Blockchain explained: how it works and how to keep it securePosted on: June 8, 2022
Blockchain is a relatively new technology, but it has already significantly reshaped the digital world.
Developed and harnessed for cryptocurrencies, blockchain is essentially a decentralised, digital database that’s built on a foundation of transparency, security, and data immutability.
How blockchain works
Blockchain is a type of distributed ledger technology (DLT) which means that it operates on a peer-to-peer network that’s spread out across multiple computers, often referred to as nodes.
Data can be added and accessed within the ledger – or block – and the nodes will then validate and record the transaction using what’s known as a consensus protocol. Once the block is filled, it’s connected to the previous block in its cryptographic chain and then a new block becomes available.
This decentralised, distributed process restricts single points of failure, and ensures that no single user can tamper with the transaction records.
However, there are a few different kinds of blockchain, each operating a little differently.
A public blockchain can be joined by anyone, and participation is anonymous. These can also be called permissionless or trustless blockchains. It’s fully transparent to all users.
A private blockchain only grants access to identified members, and the blockchain’s operator can override, edit, or delete entries on the blockchain.
A permissioned blockchain, also known as hybrid blockchain, is a mix of public and private blockchains. Specific permissions can be granted to individual users within the blockchain.
A brief history of blockchain
Blockchain technology was developed in 2008 to power Bitcoin, the world’s first cryptocurrency, tracking Bitcoin uses and Bitcoin transactions.
This digital currency – and others like it – operates outside a central authority using blockchain cryptography. While the inventor of the Bitcoin blockchain remains unknown, it’s been connected to a presumed pseudonym, Satoshi Nakamoto, who also authored the Bitcoin white paper.
Soon, other cryptocurrencies and startups were developing their own blockchains, and uses for the technology began to expand.
The Ethereum blockchain, for example, powers the Ether (ETH) cryptocurrency, but it’s also home to a huge community – also known as an ecosystem – and developed decentralised finance (DeFi) protocols for financial products and services that are widely well regarded and used.
Hyperledger, meanwhile, was developed by Linux in partnership with IBM, Intel and SAP Ariba in 2015, and supports collaborative blockchain ledgers with open-source blockchains and blockchain technology.
Applications for blockchain technology
As blockchain technology evolves, so do potential blockchain applications and blockchain solutions.
Growing uses for blockchains include:
- Non-fungible tokens (NFTs). These digital assets are powered by smart contracts on blockchains.
- Supply chain management. Businesses can utilise blockchains to better manage supply chains, helping to keep records of transactions that are transparent and traceable.
- Financial services. Banks and other financial system institutions can use blockchain technology to streamline their services, reduce risks, and enable real-time verification. Everything from bank account and credit card information to payments system data can be held safely and securely.
- Healthcare. Providers can use blockchain networks to preserve and exchange patient and other record-keeping data. Other use cases include electronic health records that are accessible to patients, and medical staff credential verification.
Are blockchains secure?
Strong security is one of the defining features of blockchain technology. It’s considered secure by design because all transactions are added to the blockchain through a validation mechanism called a consensus protocol.
A blockchain’s consensus protocol is the process nodes use to validate transactions within the blockchain. It’s the specific method, or set of rules, that are used to verify whether a transaction is true and can be added to the ledger – or not.
In fact, because of the distributed nature of the chain, a person attempting to make fraudulent modifications would need to have control of more than 51% of the nodes within the chain – or computers that are more powerful than the rest of the network’s nodes combined – to alter all of the transactional records within the chain in a very short time frame and before new blocks are created. This is known as a 51% attack, but it’s worth noting that private blockchains are immune to it.
So while it’s not totally impossible to tamper with and amend blockchain data, it’s nearly impossible, and incredibly unlikely.
However, there are other security risks that blockchain users should be aware of and protect themselves against.
Potential blockchain security threats
- Lost or stolen keys. When purchasing cryptocurrencies, buyers are issued with a private key, which is effectively a password that allows them to access and manage their funds. If this key ends up in the wrong hands, it can be used to steal funds. For example, people believe lost or stolen keys are likely behind the theft of nearly $73m (USD) in Bitcoin from one of the world’s largest cryptocurrency exchanges, Bitfinex.
- Routing attacks. When hackers intercept data as it’s being transferred to a blockchain, this is called a routing attack. Users of the blockchain may not even realise anything is amiss, but hackers can extract both crypto funds and data from within the transfer.
- Sybil attacks. Sybil attacks occur when hackers flood blockchain networks with huge numbers of false network identities in order to crash systems.
- Phishing attacks. Like phishing attacks more widely, blockchain phishing attacks attempt to scam people into sharing their credentials in order to gain access to their cryptocurrency wallets.
Help keep blockchains secure
As the digital landscape continues to expand and change, employers need computer science professionals who can keep up. By studying the 100% online MSc Computer Science at the University of Sunderland, you will develop fundamental knowledge in areas such as cyber security, data science, and machine learning, in addition to practical skills in networking, databases, programming, and web design and development. You will also get the opportunity to examine current, cutting-edge research and technical developments in the field.
This flexible master’s degree has been designed for people who aren’t from a computer science background and want to launch a new career, but it’s also suitable for professionals in computer science roles who want to gain an academic qualification to enhance their career prospects.