There is loads of information and technical jargon out there about this disruptive new technology.
Our goal is to make concepts like Blockchain easy to comprehend, in order to further empower you on your investing journey.
From crypto mining stocks to the plethora of cryptocurrencies out there in the world today, understanding what Blockchain is all about is a key factor in making a sound investment decision within the diverse world of crypto.
Last time we went over the basics on how this technology works, and what it is capable of.
Today, we highlight how safe and sound Blockchain technology really is.
As if we haven’t heard this word come up enough.
Blockchain can be privately centralized or decentralized. Bitcoin for example, uses a decentralized blockchain, meaning there are dozens of different groups of computers that hold its blockchain data, all dispersed within several different geographic regions, operated by separate groups of individuals. The tens of thousands of computers that are managing Bitcoin’s network are referred to as nodes.
Blockchains can also exist solely for the operations of one particular entity, owned privately. Such is the nature of a private, centralized blockchain.
Can Blockchains Make Mistakes?
This a natural question, given the fact that blockchain data is permanent and can’t be tampered with. If a user were to theoretically tamper with one of the nodes, the other nodes have the ability to detect the node with the altered information, by cross referencing with themselves.
This means that a single node with any errors can reference thousands of other nodes in order to help correct the data. With this method, however, the other nodes within the blockchain cannot alter the information of another; but instead merely aid the node in correcting itself.
This network proves to be secure in the fact that there is full transparency throughout the entire blockchain network. Even hacked and stolen coins can be easily traced, due to the blockchain knowing exactly where that particular coin is going along its entire journey. Although a hacker’s identification is not as easily traceable, the stolen tokens are.
Any major changes to the blockchain must be approved by a majority of the entire network, which means over 50% of the computing power, across several different cities, dozens of computer groups, and tens of thousands of computers, would have to agree.
That’s quite the vote.
What About Security?
Security and trust are two main components of blockchain.
The linear and chronological way the data is stored is a big part of that. Every new block of data is added to the “end,” securing their permanent position, unless a majority have reached a consensus to alter it in any way.
Did you know? Each block in Bitcoin’s blockchain has a position on the chain, called a “height.” Bitcoin’s height has reached 656,197 blocks as of November 2020.
A hash is a code generated by turning digital info into a sequence of numbers and letters by using a mathematic function. These codes automatically adapt when the info is edited in any sort of way. Any given block in a blockchain not only has its own hash, but the hash of the block before it, as well as a timestamp.
This is huge for security. It means that if a hacker wanted to tamper with the blockchain and steal Bitcoin, the entire chain would cross-reference their copies against the one that the hacker altered, immediately identifying the hacker’s copy as false.
A hacker could, theoretically be successful with their efforts. All they would have to do is simultaneously control and edit 51% of all the blockchain copies, making their new copy a majority. Once achieved, the hacker would have to redo every single one of the remaining blocks as they would now have different hash codes and time stamps.
All of this would have to be done swiftly, as the network members would be able to see these drastic changes, and pivot to a new version of the chain that has not been affected. Doing so would cause the attacked version of the Bitcoin to tank in value, leaving the hacker with a giant heap of a worthless digital asset.
Success for the hacker would simply require the hacker to take control of, simultaneously edit, and sell off all the assets before the network takes notice. Voila. Easy, right?
Yes, that was sarcasm.
Is Blockchain Used Only for Crypto?
Although the technology of Blockchain is extremely useful for cryptocurrency, its functionality doesn’t end there.
Originally started by two researchers in 1991, who were outlining a system where timestamps couldn’t be tampered with, blockchain provides security to many different applications.
Essentially impossible to tamper with: this kind of security is invaluable. Product inventories, transactions of any kind, land deeds for home ownership… the list goes on.
Imagine a voting system implemented on a blockchain. This would revolutionize democratic elections. Candidates could have a specific wallet address, in which citizens could send ‘vote’ tokens that they were issued, directly to the candidate’s wallet.
Human vote counting would no longer be necessary. Blockchain, being a traceable, immutable technology, would display all the results fairly and prevent anyone from fraudulently tampering with physical ballots.
The use cases for blockchain go on, and we’re certain that there are already books out there specifically dedicated to exploring them. We, however, we will be going more in depth to how blockchain compares to banks, what “tokens” are, and more, to answer the questions that you have. Stay tuned and stay informed.