What is the blockchain and how secure is it?
Blockchain is a technology that is allowing different types of transactions without the interference of a middle man, with more efficiency and fewer costs. But the question that keeps resonating is; is the Blockchain secure? Businesses, governments and institutions are concerned with these issues as many of them have started using the technology to deliver aids, smart contracts, health services and others.
Blockchain is known to be a decentralized ledger that helps save costs by getting rid of intermediaries (for example banks). This technology allows entries to the ledger. The entries are validated by a wide community of users.
Every block is a representation of a transactional record which are linked in the chain. Once the distributed computer network approves the record it lists the blocks of transactions and this is how the blockchain is formed.
When it comes to the security of the technology, many would say “perfect immutability does not exist.” Therefore, blockchain is technically disposed of modification. However, modification is deemed nearly impossible as it required exceptional computing power and mathematical puzzle. In order to apply a modification to one chain, you should be in control of at least 51% of the computers found in the same distributed ledger. You will also need to modify all the transactional records in a short period of time. This in fact, has never happened so far.
Security and privacy of Blockchain
Blockchain achieves security and privacy by enabling confidentiality and privacy through “public key infrastructure.” This concept protects from malicious attempts to modify and change data, and by preserving the size of a ledger. The more distributed and the larger the data is, the more secured it is deemed to be.
Another concern about blockchain is its insufficient data privacy, limited scalability, and absence of harmonized industry standards.
In the EU, data privacy is a rising concern as the GDPR (General Data Protection Regulation) enforces strict rules for data and consent retention. This requires businesses to guard the personal privacy and data of the citizens’ transactions within the EU. This problem is faced by private (known as permission blockchains) and public blockchains (cannot control who is hosting the node).
To go more into details when it comes to the privacy issue, the blockchain’s operator can store personal data, off-chain, and protect them with a “hash” which is a transformation of the data to unreadable information that potential hackers won’t have the ability to understand. Data stored off-chain is held whether in a traditional database or by the individuals themselves. The documents that allow users to know their costumers (driver’s license, passports, etc.) can be stored off-chain using application systems and a standalone database or other traditional technology.
On the other hand, storing data off-chain means that immutability and transparency are reduced, which puts you at a higher risk of losing or having your personal information stolen as it is spreading across the other networks.
One of the solutions posed is called “self-sovereign identity”, which is a digital concept that allows users to have control over whom they are sharing their personal information with.