These Are the Key Points about Blockchain Technology You Need to Know
Blockchain technology has created a lot of buzz in recent years, but many people still do not understand what it is and the applications it may have. Some people associated blockchain with Bitcoin. While blockchain does play an important role in cryptocurrencies like Bitcoin, it has many more applications.
When people try to learn about blockchain, they often encounter rather vague language. Blockchain is often describe as a public ledger that is distributed and decentralized. This description is accurate, but difficult to parse.
What Exactly Is Blockchain Technology?
One of the best ways to understand blockchain technology is to break down the name. The technology really is a chain of blocks, but not in the traditional sense. The “blocks" are chunks of digital information that are stored in a “chain,” a public database.
Each block stores information about a transaction, including time, date, and dollar amount, as well as information about the people who participated in the transaction. Blocks are distinguished from each other by a unique code called a hash so that similar transactions can be distinguished easily. Each block can store up to a megabyte of data, so often thousands of transactions are recorded in a block. When blocks receive new data, they are added to the blockchain.
Once a transaction happens, it gets recorded in a block, potentially along with other ones. Before it gets added, the transaction gets verified. In the blockchain world, verification happens through a computer network. These computers check that the transaction record is accurate and give the green light for storage of the data.
All of the transactions in a block must be verified prior to the assignment of a hash. To create a chain, the block is also given the hash of the most recent block added, which is the link that establishes proper placement. As soon as the block is added to the chain, it becomes public record and anyone can access it. The block also records information about how it got added to the chain.
How Secure Is Blockchain Technology?
One of the biggest benefits to using blockchain is the built-in security. New blocks are added to the chain linearly and chronologically. The term “height” is used to refer to the position of a block on the overall chain. Once a block is added to the chain, it becomes very difficult to alter its contents because of the hashes recorded on the block (its own and that of the one before it).
Any edits cause a shift in the hash. This would immediately make it evident that the information was tampered with, since the code would no longer match the one in the following block. While hackers can change the information in a block, they would need to edit the following block’s hash to cover their tracks. However, doing that would alter another hash that is protected by a different block.
In other words, hackers would need to edit every block on the chain subsequent to the target block in order to hide their tracks. This is virtually impossible because it would require so much computing power. As a result, once a block gets added to the chain, it becomes virtually impossible to delete and extremely difficult to alter.
The other question is in the veracity of a block before it is added. Only computers that prove themselves through a consensus model can add blocks to the chain. This model involves solving a complex problem that requires a great deal of computing power. Hackers would need to control more than half of all computing power on a blockchain to add false information, a prospect that is more than likely impossible.
How Private Is Blockchain Technology?
The other area of concern that often comes up with regards to blockchain technology is privacy. After all, any person can see the contents of a blockchain. Additionally, people can even make their computers into nodes, which means that the system receives a new copy of the blockchain whenever it is updated.
Nodes mean that there are thousands, or even millions, of copies of the same blockchain. Each blockchain is identical, which makes manipulation of the data difficult since only one version would differ from all the rest. Hackers would need to change every copy of the blockchain ledger. This system is what has made blockchain a “distributed” way of storing data.
Distribution of data adds to security, but it raises questions about privacy. However, people may be surprised to know that identifying information about the users involved in transactions is not available. Transactions recorded on the blockchain are not completely anonymous, but the personal information about users is limited to a username or a digital signature.
The issue with this system is that people do not always know how is adding blocks to the new chain. However, the security is addressed by the consensus model tests that require computers to prove themselves prior to adding a block.
