HOW THE BLOCKCHAIN KEEPS TRANSACTIONS SECURE
One of the major strengths of cryptocurrencies is the security and immutability of transactions. This is made possible by blockchain technology. Most of the cryptocurrencies have blockchain as the back-end technology that is used to store all the transaction data. A blockchain is basically a digital ledger that stores a cumulative list of records of transactions that are linked using cryptography. In this post I am going to take you through how this technology is able to keep transactions secure in the presence of so many hackers on the internet
First all let’s look at how data added to the blockchain?
One block on the chain can contain thousands of transaction data depending on the size of block of that particular blockchain. For instance, a typical bitcoin transaction is 570 bytes in size. One block of the bitcoin blockchain is 2MB in size. This means each block will contain a minimum of about 3500 transactions.
The transaction starts right from when you send someone money from your available balance on any cryptocurrency wallet. After clicking the send button, this transaction is added into a block of unconfirmed transactions that are awaiting to be processed by miners. A miner is someone who offers their computer to be used in the processing of these transactions in a blockchain. These transactions are distributed among miners to start the verification process.
The role of a miner is to verify the authenticity of the transaction based on the data in the blockchain. This data incudes information like the balance one has on their wallet app and whether it’s enough to do the transaction they intend to do. Once all the requirements to process the transactions are met, the next step is adding the transaction to the blockchain so that it is registered on all nodes (computers on the blockchain network). Most cryptocurrencies give people the option of paying higher transaction fees in order to have their transactions processed faster. Transactions that have the higher fees are what miners normally give priority.
Verification and adding this transaction onto the blockchain will require adding a digital signature or hash output to prove that the transaction is valid. This is what is referred to as proof of work. Adding this signature requires solving complex mathematical equations that needs a lot of computing power. After generating this digital signature, the transaction block is now ready to be verified by other miners before it can be added to the blockchain.
After a hash output has been added, the block is shared with all other miners to also verify and reach at some form of consensus that the hash output is complex enough. When other miners verify that the transaction block is valid, the block is now added to the blockchain. This block is also shared with all other nodes (mining computers) so that they add it to their blockchain as well. This process of all miners verifying a block and reaching consensus is what makes it hard or almost impossible to compromise the block chain by adding a fake transaction.
Immutability of the blockchain
In a blockchain, every block has a digital signature and that of the previous block. This means that if data in any block is removed (e.g. deleting a transaction), there will be need to change all the hash values of the following blocks which requires you to convince all the miners on blockchain. It also requires a lot of computing power to regenerate all these hash values for the following blocks. So even if a hacker is able to access one of the computers used to mine, he’ll have to also get access on all other computers on the chain in order to remove or add data which is close to impossible. That is why it is extremely hard or almost impossible to delete any data within a blockchain.
Blockchain technology can be applicable in several other industries
The immutability of blockchain makes it the most secure system as far as data integrity is concerned. This makes this system ideal for several other applications and not just cryptocurrency transactions. Some of the industries that can take advantage of this technology include;
- Security organs for storing criminal data
- The medical industry for storing people’s medical data
- Academic institutions to store academic records
- The blockchain can also be used in voting systems to make sure every voter information added to the blockchain is not altered
Using blockchain technology in the institutions above will ensure there’s no alteration of the data that maybe essential for future reference. There are a couple of industries even some that I have mentioned above that are already using blockchain technology to store their data.
Conclusion
Blockchain is mainly secure because of two major reasons we have discussed above that is; the need for consensus from all miners in order to add a block to the chain and also the complexity involved in removing any data from the blockchain. So, the chain does not depend on anyone for security but miners who all have to reach consensus regarding adding and removing transactions data from the blockchain.
However, the only drawback of this process is it slows down transactions. This is why centralized payment methods like VISA and Mastercard have way faster transaction speeds than decentralized platforms like Bitcoin. Several Cryptocurrencies are on a race to finding a solution for this issue by making a couple of modifications in their blockchains to make them more efficient. And with computing power increasing, we expect this problem to be solved in a couple of years.
