Blockchain is secured through a variety of mechanisms that include advanced cryptographic techniques, mathematical behavioral change theories, and decision-making mechanisms. Blockchain technology is the basic structure of most digital currency systems and is what prevents this type of digital money from being duplicated/copied or destroyed.

Ways to use blockchain technology in other contexts where data immutability and security are of high value are also being explored. Some examples of this include recording and tracking charitable donations, medical databases, and supply chain management.

However, blockchain security is not a simple topic. Therefore, it is important to understand the basic concepts and mechanisms that confer strong protection to these innovative systems.


Concepts of immutability (immutability) and compatibility

Although many features are associated with blockchain security, the two most important are consensus (consensus) and immutability (immutability). Consensus refers to the ability of nodes within a distributed blockchain network to agree on the true state of the network and on the validity of transactions. The process of achieving consensus usually relies on so-called consensus algorithms.

On the other hand, the word immutability refers to the ability of the blockchain to prevent changing transactions that have already been confirmed. Although these transactions mostly relate to the transfer of digital currencies, they may also refer to records of other, non-monetary forms of digital data.

Consensus and immutability together provide a framework for data security in blockchain networks. While consensus algorithms ensure that the rules of the system are followed and that all parties involved agree on the current state of the network, immutability ensures the integrity of data and transaction records after each new set of data is validated.


The role of cryptography in blockchain security

Blockchain networks rely heavily on cryptography to achieve their data security. One important cryptographic function in this context is the hashing function. Hashing is a process whereby an algorithm known as a hash function takes data input (of any size) and returns a specified output containing a fixed-length value.

No matter the size of the input the output will always appear the same length. If the inputs change, the output changes completely, but if the inputs do not change, the resulting hash will always remain constant no matter how many times you run the hash function.

In blockchain, these output values ​​known as hashes are used as unique identifiers for blocks of data. A hash of each block is created linked to the hash of the block that preceded it. This is what links the blocks together and forms a chain of blocks (blockchain). Furthermore, the hash of a block depends on the data contained within that block which means that any change made to the data requires a change in the hash of the block.

Therefore, the hash of each block is generated based on the data within that block and the hash of the previous block. These hash identifiers play a key role in ensuring the security and immutability of the blockchain.

Hashing is also used in consensus algorithms used to validate transactions. For example, in the Bitcoin blockchain, the Proof of Work (PoW) algorithm used to achieve consensus and mine new coins uses a hash function called SHA-256. SHA-256 takes data input and returns a hash that is 256 bits or 64 characters long as the name suggests. In addition to providing protection for transaction records in Ledgers. Cryptography also plays a role in ensuring the security of wallets used to store units of digital currencies. The paired public and private keys that allow users to receive and send payments are generated respectively through the use of asymmetric cryptography or public key cryptography. Private keys are used to create digital signatures for transactions, making it possible to authenticate ownership of the coins being sent.

Although the details are beyond the scope of this article, the nature of asymmetric encryption prevents anyone except the owner of the private key from accessing funds stored in a cryptocurrency wallet, thus keeping those funds safe until the owner decides to spend them (as long as the private key is not shared or hacked).


Cryptoeconomics

In addition to cryptography, a relatively new concept known as cryptoeconomics plays a role in keeping blockchain networks secure. It is associated with a field of study known as game theory that mathematically models decision-making by rational agents in situations with predetermined rules and rewards. While traditional game theory can be broadly applied in a range of situations, cryptoeconomics defines and describes the behavior of nodes on distributed blockchain systems.

In short, cryptoeconomics is the study of the economics within blockchain network protocols and the potential outcomes their design may provide based on the behavior of their participants. Security through cryptoeconomics is based on the idea that blockchain systems provide greater incentives for nodes to act honestly rather than attempt to engage in malicious or erroneous behavior.

Once again, the Proof of Work/PoW consensus algorithm used in Bitcoin mining provides a good example of this incentive structure.

When Satoshi Nakamoto created a Bitcoin mining framework it was intentionally designed to be an expensive and resource-intensive process. Because of its complexity and computational demands, mining used in a proof-of-work algorithm involves a significant investment of money and time, regardless of where and by whom the nodes are mined. Therefore, such a structure provides a strong barrier to malicious activity and significant incentives for honest mining activity. Insufficient or ineffective nodes are quickly kicked out of the blockchain network while an active and efficient miner has the potential to obtain large block rewards.

Likewise, this balance of risk and reward also protects against potential attacks that consensus can face when the majority hash rate of a blockchain network is placed in the hands of a single group or entity. Such attacks, known as 51% attacks, can be extremely destructive if carried out successfully. Given the competitiveness of the PoW mining system and the size of the Bitcoin network, the possibility of a malicious actor controlling the majority of nodes is highly unlikely.

Furthermore, the cost in computing needed to perform a successful 51% attack on a network the size of Bitcoin would be astronomical. This makes the incentive for such an attack very small given the very large investment it would require.

This fact, known as the Byzantine Fault (BFT), contributes to the properties of the blockchain. Which is basically the ability of a distributed system to continue operating normally even if some nodes are exposed to danger or malicious action.

As long as the cost of creating the majority of malicious nodes remains prohibitive and there are better incentives for honest activity, the system will be able to thrive without any major disruption. However, it should be noted that small blockchain networks are certainly vulnerable to a majority attack (the 51% attack) because the total hash rate allocated These systems are much lower than Bitcoin.


Concluding thoughts

Blockchain systems can achieve high levels of security as distributed systems through the combined use of game theory and cryptography. As with almost all systems, it is important to apply these two areas of knowledge correctly. The delicate balance between decentralization and security is vital to building a reliable and efficient cryptocurrency network.

As the use of blockchain continues to evolve, their security systems will also change to meet the needs of different applications. For example, the private blockchain systems currently being developed for businesses rely more on security through access control than on the game-theoretic mechanisms (or cryptoeconomics) that are indispensable to the integrity of most public blockchains.