5 Basic Principals Of Blockchain Technology : What Makes Blockchain Different And Secure?
Blockchain, the distributed ledger technology underlying bitcoin, has for more value and not only confined to the crypto-currency it supports. The security feature DLT offers, has turned all the eyes to it and explore possibilities beyond crypto currency. However, to reap security benefits, it’s necessary to make sure that the initial rules we’re putting in place aren’t setting us up for security problems later on.
To understand the associated security risks in blockchain technology, it’s necessary to know the fundamental principles of the technology.
Here are 5 basic principles underlying the blockchain technology.
- Distributed database
Each participant on a blockchain network has access to the complete information and its complete ledger. No single participant controls the information or the data. Each participant will validate the records of its transaction partners directly, without any third party partner.
- Peer-to-Peer Transmission
In blockchain communication happens directly between peers rather than on a central server. Every node stores and share info to any or all alternative nodes.
Every action of nodes on network and associated values are visible to anyone with access to the system. Each node, or user, on a blockchain is digitally signed by a unique 30-plus-character alphanumeric address that identifies it. Users will opt to stay anonymous or give proof of their signature to others. Transactions occur between blockchain addresses.
- Static Records
Once a transaction is posted to blockchain network, the records cannot be tampered. As a result, they’re synced to each transaction record that was posted in past (hence the term “chain”). Various machine algorithms and approaches are enforced to ensure that the storing of the information is permanent, chronologically ordered, and readily available to any or all others on the network.
- Computational Logic
The digital nature of the ledger means blockchain transactions are often tied to computational logic. Therefore, users will use pre-defined algorithms and rules that mechanically initiate transactions between nodes.
Primarily utilized in enterprise markets, private blockchain offer their operator nodes, managing capability over who can read the ledger of verified transactions, who can submit transactions, and who can verify them. The applications for private blockchain incorporate a variety of business transactions during which multiple parties want to participate at the same time however don’t absolutely trust each other. For instance, private blockchain systems supporting land records, commodities market, and supply chain management are being tested.
As these systems develop and evolve, may encounter situations that can impact the security of the system and assets it manages or stores.
Taking appropriate measures to make security framework robust at an early stage mitigates the issue of creating fundamental changes to a product to deal with a security flaw shortly.
Security starts with architecture
One of the key steps to set up a non-public blockchain is designing architecture of the system. Blockchains accomplish consensus on their ledger (the list of verified transactions) through communication. Communication is needed to approve new transactions and write them on blockchain. This communication happens between nodes, each of them maintains a replica of the ledger and informs the opposite nodes of the latest information: newly submitted or new verified transactions. Private blockchain operators can control who is allowed to access a node. In addition to this, a node with a lot of connections has advantage to receive information faster than others. Likewise, nodes are also needed to keep up an explicit range of connections to be considered active. A node that restricts the transmission of information, or transmits incorrect information, is held accountable and can be removed from network to keep up the integrity of the system. The underlying assets on a blockchain can grant more-central positions within the network to established trading partners. This would be required to keep up a connection to at least one of those central nodes as a security measure to ensure it behaves as expected.
Another security concern within the establishment of network architecture is the way to treat non-interacting or intermittently active nodes. Nodes could go offline for inappropriate reasons, however the network should be structured to operate in a way (to obtain consensus on previously verified transactions and to properly verify new transactions) without the offline nodes, and it must be able to quickly bring these nodes back up to speed if they return.
Private blockchain operators therefore should decide a way to resolve the problem of lost identification credentials, notably for systems that manage physical assets. For instance, even if nobody would require to prove ownership of a barrel of oil, the barrel needs to reside somewhere. Bitcoin presently provides no recourse for those, who have lost their private keys; similarly, stolen bitcoins are nearly impossible to recover, as transactions submitted with stolen keys seem to a validating node to be indistinguishable from legitimate transactions.
Private blockchain owners have to take decisions like, under what circumstances, to reverse a verified transaction, notably if that transaction is proven to be illegitimate. Transaction reversal can undermine confidence in the immutable nature of the system, however a system that allows intensive losses as a results of the exploitation of bugs will result in lost users.
In a private blockchain, operators can opt to allow only certain nodes to perform the verification, and these trusted parties would be liable for communicating verified transactions to the rest of the network. The responsibility of granting access to those nodes or expanded set of trusted parties is a crucial security decision made by the blockchain system operator.
Hitesh Malviya is the Founder of ItsBlockchain. He is one of the most early adopters of blockchain & cryptocurrency enthusiast in India. After being into space for a few years, he started IBC in 2016 to help other early adopters learn about the technology.
Before IBC, Hitesh has founded 4 companies in the cyber security & IT space.