Distributed ledger technology known as blockchain is easily one of the easiest ways to secure transactions. How does blockchain offer security?
Here’s my view of how blockchain records can be secured and why this form of technology is exceptional when it comes to safety and data privacy.
Why Blockchain is Secure
Blockchain is simply a digital chain of blocks containing transaction records. Each block is connected to others before and after it. So tampering with a single record is next to impossible. I find blockchain to be a single most compelling example of a secure means of recording transactions.
After all, records on blockchain are secured through cryptography. Additionally, network participants have private keys assigned to transactions made. These act as a personal digital signature. Therefore, if the record is altered, the signature becomes invalid and the peer network is immediately alerted.
Bigger Network = Better Security
Blockchains are distributed and decentralised. Across P2P networks, blockchains are constantly updated and in sync. As these are not in a central location, there is no single point of failure. The result? Data cannot be changed from a single computer. The bigger the network, the more tamper-proof it is.
All Blockchains Are Not Equal?
A lot of hype surrounds securing blockchains. I would emphasise that it is important to link technology chosen to the security required. Presently, there are private and public blockchains and each can provide a different level of security. Another point of difference is how transactions are verified. For transactions to be added to a blockchain, network participants must show consensus.
For example, public blockchain Bitcoin achieves consensus through mining. Consensus on private blockchains is attained through selective endorsement. The golden standard is that a blockchain is only as secure as its infrastructure.
Infrastructure with integrated security features prevents access to sensitive data. It also guards against illicit attempts for changing data or apps within the network.
How to Secure Blockchain
The Cambridge Centre for Alternative Finance reports 67% of central banks work with blockchain. Now is the time for technologies securing the blockchain to mature. I find many experts concur that blockchain does not need much security, as security is inbuilt by design. Even if hackers indirectly attack the blockchain, it is difficult to alter distributed ledgers once data distribution has taken place.
While distributed ledger increases resiliency, I still feel prevention is better than cure. Choosing a secure blockchain means selecting the correct fabric on which to base the network, as well as the right infrastructure on which to run it.
Securing blockchain technologies is, after all, the key to a brighter future for the financial world.