Cryptocurrencies have gone a long way from an innovative tool designed to be digital cash like Bitcoin (BTC) first was, to the numerous multifunctional crypto assets that enable various uses of their technology such as the Ethereum (ETH) platform.
When BTC was launched in 2009, it promised people a new, fast, reliable, and secure financial tool, a sort of futuristic money that doesn’t physically exist beyond its network. The network was called the blockchain, and at the time of its launch, blockchain technology was a revolutionary, decentralized method for storing and transferring value in the form of Bitcoin. A couple of years later in 2015, the Ethereum blockchain was launched, which provided users with new functionalities such as smart contract capabilities and the ability for powering decentralized applications (DApps).
Blockchain technology has become a standard for the functioning of cryptocurrencies. Bitcoin sets the standards of a secure and reliable blockchain network. With the introduction of blockchain technology and cryptocurrencies, people worldwide suddenly gained access to a fast and very secure form of financial and data transfer.
Let’s take a look at what exactly is blockchain technology, how the most famous BTC blockchain works, why it is safe, and what are the numerous use cases of blockchain technology in the world today.
Cryptocurrency and Blockchain Technology
Before we dive into the question of the security of blockchain, let’s give you an overview of how blockchain works.
A blockchain is a cryptographic network with distributed ledger technology that acts as a sort of digital database that stores various types of information and can thus be used for different purposes.
The most popular cryptocurrencies use blockchain technology as a means of storing information and facilitating transfers of funds around the globe. The most popular blockchains are decentralized but there are also currencies that run on private blockchains.
One of the main differences between classic digital databases and blockchains is the way data storage is structured. Databases structure data in the form of tables while blockchains do this in the form of a chain. Data stored on a blockchain is grouped into blocks.
Each block stores a certain amount of information depending on the storage policy of that blockchain. This storage capacity of each block is decided by the developer teams that made the chain.
Every block first needs to get filled with information before it is added to the chain. In order for a block to get filled and activated, system nodes, also known as miners, need to use their computing power to process enough information to fill the block. Once a certain amount of transfer data is processed, a new block is discovered and added to the blockchain.
Blockchains, which act as distributed public ledgers, are totally decentralized, with no central authority that processes data and transactions. Instead, the numerous blockchain users (miners) are the ones who verify each and every transfer made on the network independently of each other, through the Proof-of-Work algorithm. Blockchain technology allows chronological data storage that gives every transfer an exact timestamp to identify it on the blockchain.
How Does the Bitcoin Blockchain Work
The BTC blockchain network was the first such network in the world and cryptography enthusiasts quickly accepted the currency, mining it with the power of their PC’s and exchanging it for fiat money like EUR and USD.
After just a couple of years, the crypto community gained substantial trust in the software behind Bitcoin, which inspired the creation of numerous altcoins with their own blockchains that copied most of the main features of the original Bitcoin network, as well as the BTC programming protocol. The Bitcoin blockchain protocol hasn’t changed at all since its launch.
When you want to send funds using the BTC blockchain, your public key shows where your BTC currently is and your private key is what gives you access to your funds enabling you to actually send them, since BTC and other cryptos don’t physically exist beyond their blockchains.
When you send your BTC through the network, it usually takes around 10 minutes for the transfer to get processed. This means that miners have to verify the validity of your transaction and its digital signature and make sure you aren’t trying to double-spend the same funds. This all happens in the process of Bitcoin mining and the authentication procedure ensures there is no fraudulent transfer.
Once enough transaction data is processed through the blockchain and the 1M data threshold is achieved, a new block of the BTC chain is discovered and your transaction is verified. However, sometimes, your transfer can remain unverified for a longer period of time if you set a low transaction fee or the network is really busy.
The security of blockchain technology is always an issue, especially since more and more people are using blockchains both for cryptocurrency transfers and software development.
We will use the example of Bitcoin to illustrate just how secure blockchain technology is. The structure of a blockchain is linear and chronological, which means new blocks are always added to the end of the chain and since the chain is a public ledger, information about all blocks is publicly available and traceable.
When a new block is created and added to the chain, it is nearly impossible to go back to an earlier point of the chain and change the content of a single block. This would only be possible if the majority of Bitcoin users would agree to it, since every block has its own specific hash and has the hash of the previous block. On top of that, each block has its own timestamp.
The hashes are a product of a complex mathematical algorithm that transforms block content into strings of letters and numbers, enabling the data to travel through the blockchain. If any piece of information that is part of a block is altered in any way, the change will be noticed in the hash code, signaling that something isn’t right.
If a hacker attempts to change some data in the blockchain and compromise the funds of users, the moment they alter a piece of information, it wouldn’t align with the rest of everyone else’s copy of the blockchain data anymore and all other users would automatically notice it. A cyber attack that aims to change the blockchain data and steal funds would require enormous amounts of resources and money to change every single blockchain’s data, along with the timestamps and hash codes.
Blockchain Use Cases
The top-notch cybersecurity provided by blockchain technology based on decentralization enables the use of blockchain-based solutions in different spheres of business. The Bitcoin blockchain is the most popular one but it is far from being the only one used.
Let’s take a look at some of the popular real-world blockchain use cases in order to shed even more light on how useful this secure technology can be.
Smart Contracts are one of the most popular ways developer teams, startups, and entrepreneurs are utilizing blockchain technology to develop open-source software solutions, web platforms, and whole decentralized ecosystems.
The Ethereum blockchain is especially known for enabling users to conduct smart contracts without any third party or central authority with the help of Ether. These contracts are widely used by developer teams for creating decentralized blockchain applications such as PoolTogether or Uniswap.
Cryptocurrency transactions apps and cryptocurrency exchanges are major users of blockchain technology, as it helps them facilitate fast and reliable transfers of digital assets. Bitcoin, as the first cryptocurrency, had a pioneering role in paving the way for using cryptos as a means of transferring money and storing value.
Also, more and more individuals and companies are using blockchain-based technology to facilitate large international transactions fast and without the need to go through all of the paperwork and bureaucracy associated with classic bank transfers.
Pioneered by Bitcoin, cryptocurrency transfer apps are exploding in popularity right now. Blockchain is especially popular in the sphere of financial services because of the money and time it can save financial companies of all sizes.
Internet of Things
Smart homes and devices are becoming increasingly popular in people’s everyday lives and the Internet of Things is heavily utilizing blockchain technology to facilitate the use of applications and devices in a highly secure manner.
IoT is using the transparency of blockchain technology to drastically lower the probability of user data being compromised while giving remote commands to their smart devices in real-time.
Blockchain technology is experimentally implemented in healthcare in some countries of the world, with promising results. The blockchain-based app Patientory is a prime example of healthcare implementation of blockchain technology. It is an advanced system for storing, classifying, and using patient information to make the healthcare system more efficient.
Apps like Patientory are solving the data fragmentation problem in healthcare by giving us ways to keep all medical records of patients in a unified system. Blockchain technology can do all this while providing impeccable data security for patients’ personal information.
In the logistics industry, one of the major concerns is the lack of fluent communication and precise data. Blockchain systems can help build transparency in the logistics industry, helping cut costs and making the whole process more lean and automated. DHL, one of the largest shipping companies in the world, is already utilizing blockchain technology to keep a digital ledger of both transactions and shipments, making their supply chain run smoother.
A Few Words Before You Go…
Blockchain technology has evolved in numerous directions since the first blockchain launch in 2009 by Satoshi Nakamoto. From a means of transferring digital currency to facilitating advanced real-life functionalities, blockchain solutions have entered various spheres of everyday life. Because of this, it is even more important to know just how secure a blockchain is, and we can safely say that the safety of data flow is fantastic when using blockchain technology.