What is Blockchain security?
Blockchain security is a comprehensive risk management system for a blockchain network, using cybersecurity frameworks, assurance services and best practices to reduce risks against attacks and fraud.
Basic Blockchain security
Blockchain technology produces a structure of data with inherent security qualities. It's based on principles of cryptography, decentralization and consensus, which ensure trust in transactions. In most blockchains or distributed ledger technologies, the data is structured into blocks and each block contains a transaction or bundle of transactions. Each new block connects to all the blocks before it in a cryptographic chain in such a way that it's nearly impossible to tamper with. All transactions within the blocks are validated and agreed upon by a consensus mechanism, ensuring that each transaction is true and correct. Blockchain technology enables decentralization through the participation of members across a distributed network. There is no single point of failure and a single user cannot change the record of transactions. However, blockchain technologies differ in some critical security aspects.
How security differs by blockchain types
Blockchain networks can differ in who can participate and who has access to the data. Networks are typically labeled as either public or private, which describes who is allowed to participate, and permissioned or permission less, which describes how participants gain access to the network.
Public and private blockchains Public blockchain networks typically allow anyone to join and for participants to remain anonymous. A public blockchain uses internet-connected computers to validate transactions and achieve consensus. Bitcoin is probably the most well-known example of a public blockchain, and it achieves consensus through "bitcoin mining." Computers on the bitcoin network, or “miners,” try to solve a complex cryptographic problem to create proof of work and thereby validate the transaction. Outside of public keys, there are few identity and access controls in this type of network.
Private blockchains use identity to confirm membership and access privileges and typically only permit known organizations to join. Together, the organizations form a private, members-only "business network." A private blockchain in a permissioned network achieves consensus through a process called "selective endorsement," where known users verify the transactions. Only members with special access and permissions can maintain the transaction ledger. This network type requires more identity and access controls.
When building a blockchain application, it’s critical to assess which type of network will best suit your business goals. Private and permissioned networks can be tightly controlled and preferable for compliance and regulatory reasons. However, public and permission less networks can achieve greater decentralization and distribution.
Public blockchains are public, and anyone can join them and validate transactions.
Private blockchains are restricted and usually limited to business networks. A single entity, or consortium, controls membership.
Permission less blockchains have no restrictions on processors.
Permissioned blockchains are limited to a select set of users who are granted identities using certificates.
How does blockchain provide security?
Blockchain technology produces a structure of data with inherent security qualities. It's based on principles of cryptography, decentralization and consensus, which ensure trust in transactions. Blockchain technology enables decentralization through the participation of members across a distributed network.
Is Blockchain secure?
Blockchain technology accounts for the issues of security and trust in several ways. First, new blocks are always stored linearly and chronologically. That is, they are always added to the “end” of the blockchain. If you take a look at Bitcoin’s blockchain, you’ll see that each block has a position on the chain, called a “height.” As of November 2020, the block’s height had reached 656,197 blocks so far.
After a block has been added to the end of the blockchain, it is very difficult to go back and alter the contents of the block unless the majority reached a consensus to do so. That’s because each block contains its own hash, along with the hash of the block before it, as well as the previously mentioned time stamp. Hash codes are created by a math function that turns digital information into a string of numbers and letters. If that information is edited in any way, the hash code changes as well.
Here’s why that’s important to security. Let’s say a hacker wants to alter the blockchain and steal Bitcoin from everyone else. If they were to alter their own single copy, it would no longer align with everyone else's copy. When everyone else cross-references their copies against each other, they would see this one copy stand out and that hacker's version of the chain would be cast away as illegitimate.
Succeeding with such a hack would require that the hacker simultaneously control and alter 51% of the copies of the blockchain so that their new copy becomes the majority copy and thus, the agreed-upon chain. Such an attack would also require an immense amount of money and resources as they would need to redo all of the blocks because they would now have different timestamps and hash codes.
Due to the size of Bitcoin’s network and how fast it is growing, the cost to pull off such a feat would probably be insurmountable. Not only would this be extremely expensive, but it would also likely be fruitless. Doing such a thing would not go unnoticed, as network members would see such drastic alterations to the blockchain. The network members would then fork off to a new version of the chain that has not been affected.
This would cause the attacked version of Bitcoin to plummet in value, making the attack ultimately pointless as the bad actor has control of a worthless asset. The same would occur if the bad actor were to attack the new fork of Bitcoin. It is built this way so that taking part in the network is far more economically incentivized than attacking it.
Blockchain will give Better security during transaction of any value. This technology is mainly proposed to handling bitcoin transaction. Smart contract, Ethereum and distributed ledger are some applications of blockchain, this will also give more security. Best suited and mostly used application of blockchain is bitcoin. Blockchain gives faster and cheaper transaction than any other application. It will provide a better security especially to sensitive data. Blockchain applications often see additional beneﬁts in its transparency and immutability.