Basic blockchain security
Blockchain technology produces a data structure with inherent security qualities. It is based on principles of cryptography, decentralization, and consensus, which guarantee trust in transactions. In most blockchain or distributed ledger (DLT) technologies, data is structured in blocks, with each block containing a transaction or a packet of transactions. Each new block is connected to all the previous blocks in a cryptographic chain in such a way that it is almost impossible to tamper with it. All transactions within the blocks are validated and agreed upon using a consensus mechanism, ensuring that each transaction is true and correct.
How blockchain provides security?
Blockchain technology allows for decentralization through the participation of members in a distributed network. There is no single point of failure and a single user cannot change the transaction log. However, blockchain technologies differ in some critical security aspects.
How security differs across blockchain types?
Blockchain networks can differ in terms of who can participate and who has access to the data. Networks are generally labeled as public or private, which describes who is allowed to participate, and with or without permission, which describes how participants gain access to the network.
Public and Private Blockchains
blockchain networks generally allow anyone to join and participants remain anonymous. A public blockchain uses computers connected to the Internet to validate transactions and achieve consensus. Bitcoin is probably the best-known example of a public blockchain, and it achieves consensus through “bitcoin mining.” Computers on the bitcoin network, or “miners,” attempt to solve a complex cryptographic problem to create a 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 allow known organizations to join. Together, the organizations form a private, members-only “business network.” A private blockchain on a permission network achieves consensus through a process called “selective endorsement,” where transactions are verified by known users. Only members with special access and permissions can maintain the transaction ledger. This type of network requires more identity and access controls.
When creating a blockchain application, it is critical to assess what type of network will best suit your business goals. Private and permission networks can be strictly controlled and are preferred for compliance and regulatory reasons. However, public and permissionless networks can achieve greater decentralization and distribution.
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