Background
Blockchain is a series of blocks that carry information, as the name suggests. This approach was first published in 1991 by a group of researchers with the intention of time-stamping digital papers so that they could not be backdated, much like a notary.
It went relatively unnoticed until Satoshi Nakamoto used it to establish the digital currency ‘Bitcoin’ in 2009.
Blockchain is a decentralised ledger that everyone can access. It has an important property: once data is stored on a blockchain, changing it is extremely difficult.
Source https://ec.europa.eu/
So why is that?
Let’s look at an example of a block. Each block contains data, the block’s hash, and the preceding block’s hash. The type of data kept within a block is determined by the blockchain. The Bitcoin blockchain, for example, keeps track of the sender, receiver, and quantity of currencies in a transaction.
A block has a ‘hash’, you can compare that to a fingerprint. Hash identifies a block and all of its contents and it’s always unique, just as a fingerprint. Once a block is created, its hash is being calculated. If you were to change something inside the block, it will cause hash to change. If the hash, or ‘fingerprint’ of a block changes, it no longer is the same block. Another element inside each block is the hash of the previous block, which effectively creates a chain of blocks and it’s this technique that makes a blockchain so secure.
That isn’t all, though. Computers are getting extremely fast, capable of calculating hundreds of thousands of hashes per second, implying that you might tamper with a block and recalculate the hashes of previous blocks to render the blockchain invalid. To prevent this, blockchain employs a consensus mechanism. It’s known as proof-of-work in the case of Bitcoin.
Security & Consensus Mechanism
Proof-of-work (PoW) is a consensus technique for adding new blocks to the blockchain. On a distributed, decentralised network, users (also known as miners) compete against one another to solve complicated computational challenges. These riddles are tough to solve, yet the right answer is simple to check. When a miner discovers a solution, they broadcast the block to the network, where all other miners may verify that it is accurate. This means that if you were to tamper with a block you would also need to recalculate the proof-of-work for all following blocks.
To effectively tamper with a blockchain, you must tamper with all blocks on the chain, redo proof of work for each block, and gain control of more than 51% of the network’s miners.
In the case of Bitcoin, the cost of such a takeover, if undertaken, is now estimated to be in excess of $5.4 billion dollars in hardware alone.
DISCLAIMER: The information contained in this article is for educational purposes only and does not constitute any form of advice or recommendation by Wheatstones, and is not intended to be relied upon by users in making (or refraining from making) any investment decisions.
Comentarios