Get to know Blockchain!

Live in the here and now. Take what you give. Tomorrow may be completely different than what you imagined for yourself. It doesn't matter better or worse, just different.

CONTENT:

1) The concept of immutability and consensus.

2) The role of cryptography in blockchain security.

3) Cryptoeconomics.

4) Conclusions on the security of blockchain technology.

1) The concept of immutability and consensus.

Blockchains are secured using a variety of mechanisms that include advanced cryptographic techniques and mathematical models of behavior and decision making. Blockchain technology is the basic structure of most cryptocurrency systems and prevents this kind of digital money from being duplicated or destroyed.

The use of blockchain technology is also being explored in other areas where data immutability and security are very important. A few examples include filing and tracking charity donations, medical databases, and supply chain management.

However, the security of blockchain technology is far from an easy topic. Therefore, it is important to understand the basic concepts and mechanisms that provide reliable protection for these innovative systems.

While many functions play an important role in blockchain-related security, two of the most important are the concepts of consensus and immutability. Consensus refers to the ability of nodes in a distributed blockchain network to agree on the true state of the network and the validity of transactions. As a rule, the process of reaching consensus depends on the so-called Consensus Algorithms.

Immutability, on the other hand, refers to the ability of the blockchain to prevent alteration of already confirmed transactions. While these transactions are often associated with the transfer of cryptocurrencies, they can also refer to the recording of other less reliable forms of digital data.

The combination of consensus and immutability provides the foundation for data security on the blockchain. While consensus algorithms ensure that the rules of the system are enforced and that all parties involved agree on the current state of the network, immutability guarantees the integrity of data and recorded transactions after each new block has been confirmed as valid.

2) The role of cryptography in blockchain security.

Blockchains rely heavily on Cryptography to keep their data secure. One cryptographic function that is extremely important in such a context is hashing. Hashing is a process in which an algorithm known as a hash function takes input (of any size) and returns a specific output containing a fixed-length value.

Regardless of the size of the data input, the output will always be the same length. If the input changes, the output will be completely different. However, if the input does not change, the resulting hash will always be the same, no matter how many times you run the hash function.

In blockchains, the output is known as a hash and is used as a unique identifier for a block of data. The hash of each block is generated relative to the hash of the previous block, and this is what ties them together to form a chain of blocks. Moreover, the hash of a block depends on the data contained in that block, meaning that any change to the data will require a change in the hash of that block.

Therefore, the hash of each block is generated based on the data contained in this block and the hash of the previous one. These hash identifiers play an important role in keeping the blockchain secure and immutable.

Hashing is also used in consensus algorithms used to validate transactions. For example, in the Bitcoin blockchain, the Proof of Work (PoW) algorithm used to reach consensus and to mine new coins uses the SHA-256 hash function. As the name suggests, SHA-256 accepts and returns data in a 256-bit or 64-character hash.

In addition to securing and recording transactions in registers, cryptography also plays a role in securing the wallets used to store cryptocurrency units. Paired public and private keys, which respectively allow users to receive and send payments, are generated using asymmetric encryption or public key cryptography. Public keys are used to generate digital signatures for transactions, allowing the ownership of the coins being sent to be authenticated.

Although the details are beyond the scope of this article, the nature of asymmetric cryptography prevents anyone other than the owner of the private key from gaining access to funds stored in a cryptocurrency wallet, thus these funds are kept safe until the owner decides to spend them (as long as the private key has not been transferred or has not been compromised).

3) Cryptoeconomics.

In addition to cryptography, a relatively new concept known as cryptoeconomics also plays an important role in maintaining the security of blockchain networks. This stems from an area of ​​study known as game theory, which mathematically models the rational decision-making of participants in a variety of situations with predefined rules and rewards. While traditional game theory can be widely applied in many cases, cryptoeconomics specifically models and describes the behavior of nodes in distributed blockchain systems.

In short, cryptoeconomics is the study of economics in the field of blockchain protocols and the possible results that their design can provide based on the behavior of its participants. The security of cryptoeconomics is based on the notion that blockchain systems provide more incentives for honest actions of nodes than for malicious or erroneous behavior. The Proof of Work consensus algorithm used in Bitcoin mining is a good example of this incentive structure.

When Satoshi Nakamoto created the Bitcoin mining framework, it was specifically designed to be an expensive and resource intensive process. Due to its complexity and computational requirements, PoW mining requires a significant investment of money and time, regardless of where and how the mining node is located. Thus, such a structure is a strong deterrent to malicious activity and a significant incentive for honest mining. Dishonest or ineffective nodes will be quickly excluded from the blockchain network, while honest and efficient miners can receive substantial block rewards.

Likewise, this balance of risks and benefits also provides protection against potential attacks that could undermine the entire consensus by handing most of the hash rate of the blockchain network into the hands of one group or entity. This type of attack, also known as 51% ATTACK, can be extremely destructive if successfully performed. Due to the competitiveness of Proof of Work mining and the scale of the Bitcoin network, the likelihood of an attacker gaining control of most of the nodes is extremely low.

In addition, the cost of computing power required to achieve 51% control over a huge blockchain network would be astronomical, providing an immediate deterrent to such a large investment, for a relatively small potential reward. This fact contributes to one of the characteristics of blockchain technology known as Byzantine Fault Tolerance (BFT), which is essentially the ability of a distributed system to continue to operate normally even if some nodes are compromised or maliciously acted.

As long as the cost of creating the majority of malicious nodes remains prohibitive and there are better incentives for honest operation, the system can thrive without significant disruption. However, it is worth noting that small blockchain networks are certainly susceptible to most attacks, because the overall hash rate of these systems is significantly lower than that of Bitcoin.

4) Conclusions on the security of blockchain technology.

Through the combined use of game theory and cryptography, blockchains can achieve a high level of security in distributed systems. However, as with most systems, it is very important that these two areas of expertise are applied properly. A careful balance between decentralization and security is vital to building a reliable and efficient cryptocurrency network.

As the use of blockchain technology continues to evolve, security systems are also changing to meet the needs of various applications. For example, the private blockchains that are currently being developed for commercial enterprises rely more on security through access control than on the game theory (or cryptoeconomics) mechanisms needed to secure most public blockchains.