BLOCKCHAIN PRINCIPLES: SECURITY

In this installment we will talk about security in Blockchain, the most common methods of reinforcing security in applications and also the risks to which any system designed in Blockchain is exposed.Blockchain technology is incredibly secure by design. As the technology platform behind cryptocurrencies, you should expect a healthy dose of powerful encryption in blockchain networks, but there’s more to blockchain’s data security story.

Is blockchain safe to use?

Blockchains manage a large-scale record of transactions and additional data wrapped in several layers of data security. As a result, these systems are generally regarded as safe and secure.

A blockchain is a digital ledger of transactions managed and updated by a distributed network of computers. It is easy to read the ledger and to add additional data to the chain of transactions, although each new transaction must clear several security hurdles before it is added to the blockchain. Nobody can change or delete existing data. Any attempt to tamper with the ledger is easily traced back to the prospective hacker, who then typically loses access to the network.

Why is blockchain so secure?

New transactions are added to a blockchain in a process called “minting” a new block of data. All block-minting systems have a few qualities in common:

- Every block has a unique address.

- Each new block contains a link to the block before it, forming a sequence of data blocks stretching all the way back to each blockchain’s first block.

- Together with a fresh batch of data for validating transactions, the link is protected by data encryption ensuring the correct link to the previous block is written in stone and cannot be changed.

- Each new block must be confirmed by a certain number of validation nodes reaching a consensus and minting a new token to match the freshly minted data block.

Beyond these core concepts, different blockchains can perform their minting function in many different ways. The original system is known as proof of work, where new data blocks are minted in a process known as mining. Vast numbers of computers and specialized mining systems solve complex mathematical puzzles to earn the right to issue the next data block.

This was the platform for the first cryptocurrency and blockchain system, Bitcoin, and it remains in effect today. Critics argue this method wastes enormous amounts of computing power and electricity, while supporters appreciate the fact that it takes an unrealistic investment in mining hardware to break the security of this system in a brute-force attack. 

Another popular block-minting architecture is known as proof of stake. Here, transactions are validated and baked into data blocks by existing holders of the blockchain’s digital tokens. Data validators in this system must make the choice of staking their tokens on the validation system. You can’t sell, burn, or give away tokens that are being used in this way, but you earn rewards in the form of newly minted data blocks. Staking more tokens gives you a greater chance of earning the next minting reward.

This method puts less stress on the environment, but critics like to point out that large token holders can exert an unreasonable amount of control over this type of blockchain network. If you see blockchain technologies and digital currencies as a disruptive alternative to old-school financial institutions and payment systems, proof-of-stake blockchains can’t offer the same promise of truly decentralized operations. The central control constitutes a single point of failure, and that’s a weakness that can be more easily attacked by bad actors.

APIBreeders traceability and validation system is built on top of the Algorand blockchain, utilizing proof of stake for its data validation, ensuring fast transaction times and a minimal environmental impact of our operations.