Could People Go To Jail For Data Breaches
April 23, 2019Watch out for Fuze Cards
May 7, 2019Cryptocurrencies are a growing method of making and receiving payments. One of the major components of this is blockchain technology. Given the lack of understanding regarding cryptocurrencies it is understandable that the general public does not understand exactly what blockchain is but it is something that could be one of the great innovations of the 21st century. So what is blockchain?
Block
Simply, it is just a chain of blocks. Bits of information are stored in a digital database and the information that is stored is the blocks and the database is the chain. Blocks store information about the transaction like the date and amount of the purchase. It also records who is involved in the purchase using a unique digital signature for privacy. Each block has a code called a hash that allows it to be differentiated from others and each block can potentially store a few thousand transactions and be up to one megabyte in size.
Chain
The chain is simply the blocks all strung together. When new information is added to the blocks it is added to the chain. When a transaction or change to a block is made a worldwide network of computers check to make sure the transaction is legitimate and that the details are what you say they are like the time, the amount and the parties involved. The transaction is then stored in a block, allowed to go through and the digital signatures of the involved parties are added. The hash is then added to the chain finalizing the transaction.
Mining
Once a block is added to the blockchain in a process known as mining it is available for anyone to view. Not only that, each computer on the network also has a copy of the blockchain report. This may sound completely insecure but in actuality it makes it very difficult if not impossible to manipulate afterwards thereby increasing security. What is known as consensus prevents different copies of a blockchain and a hacker would need to manipulate 51% of all stored blockchains in order to break a blockchain. It is extremely difficult but not impossible and as the technology gets more popular it becomes even more difficult since more blocks are being added.
How secure is this?
That leads to the question of just how secure blockchain is? Blocks are stored chronologically and linearly. Each block has a height, or its chronological entry into the list. Editing a block once it is added is very difficult and if done the hash is changed while the height will not change. That means if a hacker is able to edit the block the hash will be out of place since the other blocks around it will have retained their original hashes unless the hacker manages to change not only those but every other hash as well. This takes time and to do this across multiple chains is just not worth it though the system has not quite been perfected yet for blocks that get too big.
In order for a new computer to be added to the network it has to undergo testing, or proof of work. The computer must solve complex math problems and if it is able to solve the problem it is able to be added. These problems require significant amounts of power and resources and the chances of your personal computer being able to be used for this is extremely small. Game processing units are the most popular processor and are assembled into mining rigs and to build one of these is not cheap or easy. This proof of work also makes the likelihood of a hacker gaining access to the network very small but not impossible. The goal of blockchain is to allow information to be recorded and distributed but not edited, essentially read-only.
Wallets
Security can be further enhanced using a wallet, which is predominant with cryptocurrencies. Each wallet has public and private keys. A public key allows anyone to add something to the wallet but a private key is needed to remove anything from the wallet. Each key is unique and one cannot be derived from the other.
More than just crypto
Blockchain technology was first theorized in 1991 as a way to document timestamps in a way that could not be tampered with but it wasn’t until its adaptation for Bitcoin in 2009 that it became a reality. The technology has more use than just cryptocurrencies. It is a safe and reliable way to store data. It could help speed up transaction times for banks reducing them from 1-3 business days to as little as 10 minutes, no matter what day of the week a transaction was made. It can also help to exchange funds between financial institutions much more safely and reliably. Blockchain has the potential to save banks billions of dollars by just cutting risk alone.
Blockchain can also be used to store health care records, encoding them with a private key ensuring that they are accessible only by select individuals. Government could also benefit by storing information like property information in it. It could help to make property disputes easier and cheaper to resolve and remove human error from the equation by removing the need to scan or track documents down. Another important part of government could also benefit: voting. West Virginia experimented with using blockchain in the 2018 midterms. Each vote was stored as a block making them all but impossible to tamper with with the added benefit of providing instant results.
Blockchain has the potential to be one of the greatest boons to not only governments and banks but also to the public, including you the merchant. It could make payment transactions more secure and quicker. It is not just something used for cryptocurrencies though that has scared many people away from it. It could be the future of payment processing. It is certainly something that we will be keeping an eye on at JLE Business Consultants and we hope that you will as well.