Blockchains are secured using a variety of mechanisms that include advanced cryptographic techniques and mathematical models of behavior and decision making. Blockchain technology is the underlying structure of most cryptocurrency systems and prevents this kind of digital money from being duplicated or destroyed.

The use of blockchain technology is also being explored in other areas where data immutability and security are very important. A few examples include acts of recording and tracking charitable donations, medical databases, and supply chain management.

However, the security of blockchain technology is far from a simple topic. Therefore, it is important to understand the basic concepts and mechanisms that ensure reliable protection of these innovative systems.


Concept of immutability and consensus

While many features play an important role in the security associated with blockchain, two of the most important are the concepts of consensus and immutability. Consensus refers to the ability of nodes in a distributed blockchain network to agree on the true state of the network and the validity of transactions. Typically, the process of reaching consensus depends on so-called consensus algorithms.

On the other hand, immutability refers to the blockchain's ability to prevent transactions that have already been confirmed from being changed. And while these transactions often involve the transfer of cryptocurrencies, they can also refer to the recording of other less secure forms of digital data.

The combination of consensus and immutability provide the basis for data security on the blockchain. While consensus algorithms ensure that system rules are followed and all participating parties agree on the current state of the network, immutability ensures the integrity of data and recorded transactions after each new block has been confirmed as valid.


The role of cryptography in blockchain security

Blockchains rely heavily on cryptography to keep their data secure. One cryptographic function that is extremely important in such a context is hashing. Hashing is a process in which an algorithm known as a hash function takes an input (of any size) and returns a specific output containing a fixed-length value.

Regardless of the size of the data input, the output will always be the same length. If the input changes, the output will be completely different. However, if the input data does not change, the resulting hash will always be the same, no matter how many times you run the hash function.

In blockchains, the output value is known as a hash, and it is used as a unique identifier for a block of data. The hash of each block is generated relative to the hash of the previous block, and this is what links them together to form a chain of blocks. Moreover, the hash of a block depends on the data contained in that block, meaning that any change to the data will require a change to the hash of that block.

Therefore, the hash of each block is generated based on the data contained in that block and the hash of the previous one. These hash identifiers play an important role in ensuring the security and immutability of the blockchain.

Hashing is also used in consensus algorithms used to validate transactions. For example, on the Bitcoin blockchain, the Proof of Work (PoW) algorithm used to achieve consensus and to mine new coins uses the SHA-256 hash function. As the name suggests, SHA-256 accepts and returns data as a hash of 256 bits or 64 characters.

In addition to providing security and recording transactions on ledgers, cryptography also plays a role in ensuring the security of wallets used to store cryptocurrency units. Paired public and private keys, which respectively allow users to receive and send payments, are created using asymmetric encryption or public key cryptography. Public keys are used to generate digital signatures for transactions, allowing ownership of the coins being sent to be authenticated.

While the details are beyond the scope of this article, the nature of asymmetric cryptography prevents anyone other than the owner of the private key from accessing the funds stored in the cryptocurrency wallet, thus keeping those funds safe until the owner decides to spend them (as long as the private key has not been shared). or was not compromised).


Crypto economy

In addition to cryptography, a relatively new concept known as cryptoeconomics also plays an important role in maintaining the security of blockchain networks. This stems from a field of study known as game theory, which mathematically models rational decision-making by participants in various situations with predetermined rules and rewards. While traditional game theory can be broadly applied to a variety of cases, cryptoeconomics specifically models and describes the behavior of nodes in distributed blockchain systems.

In short, cryptoeconomics is the study of the economics of blockchain protocols and the possible outcomes that their design can provide based on the behavior of its participants. The security of the cryptoeconomy is based on the idea that blockchain systems provide more incentives for nodes to act honestly than for malicious or erroneous behavior. The Proof of Work consensus algorithm used in Bitcoin mining is a good example of this incentive structure.

When Satoshi Nakamoto created the Bitcoin mining framework, it was specifically designed to be an expensive and resource-intensive process. Due to its complexity and computational requirements, PoW mining requires a significant investment of money and time, regardless of where and how the mining node is located. Thus, such a structure is a strong deterrent to malicious activity and a significant incentive for honest mining. Dishonest or inefficient nodes will be quickly removed from the blockchain network, while honest and efficient miners can receive significant block rewards.

Likewise, this balance of risks and rewards also provides protection against potential attacks that could undermine the entire consensus, placing the majority of the blockchain network's hash rate in the hands of a single group or entity. This type of attack is also known as a 51% attack and can be extremely destructive when executed successfully. Due to the competitiveness of Proof of Work mining and the scale of the Bitcoin network, the likelihood of an attacker gaining control of the majority of nodes is extremely low.

Additionally, the cost of computing power required to achieve 51% control of a massive blockchain network would be astronomical, providing an immediate disincentive to such a large investment for relatively little potential reward. This fact contributes to one of the characteristics of blockchain technology known as Byzantine Fault Tolerance (BFT), which is essentially the ability of a distributed system to continue to operate normally even if some nodes are compromised or acting maliciously.

As long as the cost of creating most malicious nodes remains prohibitive, and there are better incentives for honest activity, the system can flourish without significant disruption. However, it is worth noting that small blockchain networks are certainly susceptible to most attacks because the overall hash rate of these systems is significantly lower than that of Bitcoin.


Conclusion

Through the combined use of game theory and cryptography, blockchains can achieve high levels of security for distributed systems. However, as with most systems, it is very important that these two areas of knowledge are applied properly. A careful balance between decentralization and security is vital to building a reliable and efficient cryptocurrency network.

As the use of blockchain technology continues to evolve, security systems are also changing to meet the needs of different applications. For example, the private blockchains currently being developed for commercial enterprises rely more on security through access control than on the game theory mechanisms (or cryptoeconomics) that are required for the security of most public blockchains.