Blockchain is based on a decentralized ledger that can lessen costs by withdrawing the intermediaries such as banks and by creating the effective decentralizing trust between the organizations and customers. The blockchain supplements the entries to the ledger which are formalized by the wider user-community rather than by a central authority.
Each block stands for a transactional record and the chains that are linked with them. The blockchain sustains the records distributed among computer networks and lists the blocks of transactions sequentially. For the further understanding, read carefully the given picture below.
Bitcoin is a good example to understand why the “blockchain” is considered too secure. In Bitcoin’s blockchain, the shared data is the history of every Bitcoin transaction ever made. You can also say it’s just like an accounting ledger. The ledger is stored in multiple copies on a network of computers, called “nodes.”
For the confirmation of transactions validity nodes are being checked each time when someone submits a transaction to the ledger. A subset of them compete to package valid transactions into “blocks” and add them to a chain of previous ones. The owners of these nodes are called miners. The people who makes the addition of new blocks profitably will be able to earn bitcoins as a reward and knows as minors.
So, the question arises here is “the block really immutable?”
The answer is definitely no!
The complete mutation is not possible in the blockchain like any other networks, the blockchain is proficiently inclined to the alterations. The reason is that just because the computers, or nodes, on a blockchain network are distributed, and the mathematical puzzle and computing power required to make changes makes modification nearly seems impossible. A person would require to take control of more than 52% of computers in the same distributed ledger to modify a chain and all of the transactional records within a very limited time approximately within 10 minutes for Bitcoin. Until now, this has never happened.
Blockchain can handle security and privacy concurrently by enabling secrecy through “public key infrastructure” that protects against malicious attempts to modify data, and by maintaining the size of a ledger which is too difficult in a conventional information system. The wider and more distributed the network, the more secure and authenticate it is supposed to be.
Security levels of Blockchain
1. Transaction Level
A big concern of the people who are involving with blockchain trading is about transactions validity. This is a minimum level for a well-functioning blockchain required to authorize the transactions with assurance and predictability at the end of the consensus cycle. That’s the point where the consensus method perform its assignment of assuring the transaction completeness.
2. Account Level
On a second level we are concerned about the security of accounts of our customers. There are two scenarios of this problem is well provided by the Blockchain. First, there might be a hosted account for the interchange or secondly, perhaps there is a user account which can be self-managed by means of an exclusive wallet. The main purpose to use self-managed wallets are to distribute cryptocurrency to the masses.
On the other hand, hosted exchanges and wallets contributors are well performing an important role, so they need to become really good at it. For example Facebook is not the Web. It’s a walled garden performing their tasks very well and astonishingly more secure than the Web at wider scale.
3. Programming Level
The most crucial part to develop any technology is the programming. This is where smart contracts or scripts could be accommodated. Smart contracts might have accountability from which we can gain benefits in form of resulting a drainage or disappearance of funds. The best part is that blockchain allowed us to program money, and we need to be careful in doing it.
4. Distributed Organizations Level
At distributed organizations level, smart contracts marked as “law” that becomes a house of cards that wants to be self-governing and independent. Self-determination has its own threats, but the first priority of an organization should be self-testing to get a chance to run their company independently. The organizations who only count on technical experts rather than organizational experts results in the form of fundamental flaws in associations with the operations of a company to blockchain contracts.
5. Network Level
Physically and virtually, blockchain operates on a peer-to-peer network. This network builds where the consensus methods operates. It is also being noticed that this is exactly the area we hear about the 51% attack susceptibilities, i.e. when theoretically, an attacker can spend enough money and hash power to “hijack” the transaction validation process in their favor. This category of security will concern itself with the soundness of the actual algorithms, protocols, incentives and consensus economics (whether mining or transaction costs related).
6. Governance Level
This is an unformed area for the application side of decentralized consensus. At this level we have only go through rare cases of decentralized administration. The two mostly discussed and popular cases are Bitcoin (block size) and Ethereum (hard fork) governance. The factors that influences primarily in long term security of a blockchain are those deliberate decisions which are taken over decentralized governance. We are still learning by trial and error as we figure out the best practices of decentralized governance. On one hand, Bitcoin could be criticized for being too firm on governance related changes, whereas Ethereum could be distinguishable to have been a little too slack with their recent hard fork decision process. Maybe one day, the pendulum will swing to the middle.
Why people use Blockchain?
In the era of 21st century, the most crucial decision is to trust on someone, especially in terms of trade and businesses. There is no one here whom you can trust 100% so, the people who are involving with you in trade and are not so much trustworthy the blockchain is being built up which share valuable data in a secure and transparent way.
The logic is that the blockchains store data using revolutionary math and unconventional software rules that are extremely difficult for attackers to manipulate. To theoretically build up the tamperproof system we need two things: a cryptographic fingerprint unique to each block, and a “consensus protocol,” the process by which the nodes in the network agree on a shared history.