You can’t go online and not find the word blockchain in any tweet or post. What is blockchain, and what is its definition?
What is a Blockchain?
Blockchain is simply a collection or group of information stored electronically on computers. Blockchain is a way to collect information and group it together into groups, also called blocks. Each block can only hold a certain amount of information. A block that has reached its maximum capacity is broken into pieces and attached to another one. This creates a chain.
It is irreversible for data to be gathered in blocks. Each block is assigned a timestamp as it is added. These blocks are stored on cryptocurrency’s computer farms, but they don’t have to be kept in one centralised place. These blocks can be stored in different locations, and can be managed either by individuals or groups. This is an example decentralised blockchain, but it also exists blockchains that are managed by one organisation and stored on servers under the same roof.
Decentralised applications of blockchain are transparent. You can view their history to see how they were applied. These blocks are irreversible and can be corrected if there is an error in one of them by cross-referencing the data before or afterwards. This makes it easy to track hacks within the system, so if any blocks are moved or tampered with it will be identifiable.
These blocks are records that record multiple transactions in cryptocurrency. Every transaction creates a new block. Once the block has been verified, it is added into the chain. Each block contains a cryptographic hash of each previous block in the chain, along with transaction details and a timestamp.
Satoshi Nakamoto invented the technology in 2008 as a public ledger to Bitcoin. It is interesting to note that very little information exists about the person or group behind the name. Many believe that the name is a pseudonym of the group of people who created bitcoin and the first blockchain database.
What other uses can blockchain be used for?
Blockchain has many other uses than cryptocurrency due to its transparency and security when it comes to storing data. Blockchain technology has been used by many medical institutions to store and transmit patient records. They have control over which blocks they share and what information is sensitive.
It is also being used in the music industry where artists use the technology to create transparent agreements so they can track royalties and get paid on-time. Spotify has an in-house team thanks to the acquisition of Blockchain start-up Mediachain Labs. The technology is being used to connect artists and rights holders for tracks hosted on the service.
It can also be used in real estate and is being used for creating a decentralised registry of homes.
IoT devices (Internet of Things) have also turned towards blockchains to increase security. They created decentralised authentication systems and used biometric and passwordless solutions for authentication.
What are the potential dangers associated with blockchain?
Remember that tweet by Elon Musk, which caused crypto markets to plummet overnight? It turns out that there is some truth to this tweet. Technology applications that are decentralized are highly energy dependent. Miners use algorithms and computationally complex mathematical problems to verify a block in a cryptocurrency like bitcoin. It takes a lot electricity to do this. Some blockchains require a lot of computational work, so not all crypto is created equal. Complex software is still required to create alternative algorithms, which can be both tedious and time-consuming.
Ironically, despite the promise of decentralisation the most efficient blockchains are still guarded by a few central organizations. This is a defeat of the reason why this technology was invented in the first place.
Although blockchains are more secure than other transactions, hackers can still hack them. Imagine a blockchain in which each person’s identity is stored on a block with a cryptographic secret. The key can be copied by anyone who manages to obtain it, no matter how difficult. They can then use that key to impersonate its owner. The key can be lost or destroyed and the asset or identity will be lost forever.
Automating and coding are key factors in the acceptance of new transactions on blockchain. Anyone can reprogram new transactions by gaining access to the dominant fork of a chain.
A group of hackers discovered a flaw in the Ethereum blockchain’s code in 2017. They used it to steal currency from their original owners. Despite the fact that people were able to see what was going on, nothing could be done to stop it. The blockchain is not centralised and cannot be disabled. Some white-hat programmers stepped in to help and created new statements that would ignore or delete transactions. This would allow the original owners to receive the money. The idea is to steal the money quicker than hackers and then give it back.
The GDPR and data regulations like it, also face problems with blockchains. It would be nearly impossible for a person to have their data removed from the blockchain without a global agreement among all blockchain servers. It is possible to put in a filter to stop the data from being visible, but it will still exist.
End-point vulnerabilities are also possible with blockchains. Hackers will look for weak links in the system, rather than trying to guess the keys of blocks. This is because it is nearly impossible to identify the device being used to access the data.
Hackers can use malicious code to gain high-level access to the chain if they have gained access to an endpoint.