Quick Lessons about Cryptocurrencies and Bitcoin
Privacy and Security
Anyone can view the contents of the Blockchain, but users can also choose to connect their computers to the Blockchain network. Thus, your computer receives a copy of the Blockchain that is automatically updated each time a new block is added, as a kind of RSS news, Facebook gives live updates every time a new state is recorded.
Each team from the Blockchain network has its own copy of the Blockchain, which means that there are thousands, or in the case of Bitcoin, millions of copies of the same Blockchain. Although each copy of the Blockchain is identical, the dissemination of such information through a computer network makes the information more difficult to handle. With Blockchain, there is no single definitive account of events that can be handled. Instead, an hacker would have to manipulate each copy of the Blockchain on the network.
Looking over the Blockchain notice, Bitcoin does not have access to identifying information of the users performing transactions. Although transactions in the Blockchain are not completely anonymous, the personal information about users is limited to a digital signature or username.
Blockchain technology represents a security and confidence problem in many ways: the new blocks are always stored in a linear and chronological order, meaning they are always added to the “end” of the Blockchain. After a block has been added to the end of the Blockchain it is very hard to go back and alter the contents of the block. That’s because each block contains the hash; If the information is edited in any manner, the hash code will change too.
Here’s an example: let’s say you have already suffered an attack that tried to edit your previous transaction, so you do not have to pay for your transaction twice. As soon as you edit the amount, the block hash will change. The next block in the chain will still contain the old one, and the hacker would have to update this block to cover their tracks. However, this could change the hash of that block, and the next one, and so on. To change a single block, then a hacker would have to change each block after joining the Blockchain. Recalculating all those hashes would take an enormous and improbable amount of computing power. In other words, once a block is added to the Blockchain it becomes quite difficult or even impossible to edit.
To address the trust issue, the Blockchain networks have implemented tests called “consensus models” for teams who want to join and add blocks to the chain, it asks the users to “prove” themselves before they can participate on a Blockchain network. In the presence of multiple different copies of the Blockchain, the consensus protocol adopts the longest chain available. More users over a middle Blockchain than the blocks, can be added to the end of the faster chain. By that logic, the Blockchain record will always be the one most user’s trust. The consensus protocol is one of the greatest strengths of the Blockchain technology but it also allows one of its greatest weaknesses.
One of the most common examples used by Bitcoin is called “proof of work.” Computers must “prove” that they have “worked” solving a complex mathematical computer problem. If a team solves one of these problems, they become eligible to add a block to the Blockchain. But the process of adding blocks to the Blockchain, what the cryptocurrency world calls “mining”, is not that easy. In fact, according to the Blockchain news site, BlockExplorer, the chances of solving one of these problems in the Bitcoin network were about one in 5.8 trillion in February 2019. To solve complex mathematical problems at those odds, the teams must run programs that require huge amounts of power and energy, ergo: money.
The “work proof” doesn’t completely stops cyber attacks, but it makes them way harder to happen due to the complexity to coordinate an attack on the Blockchain, they would need to solve complex mathematical computational problems to 1 in 5.8 trillion, same probabilities as everyone else. The cost of organizing such an attack would almost certainly be higher than the benefits.
In the Bitcoin network, Blockchain is not only shared and maintained by a public network of users but also agreed. When users join the network, the connected computer receives a copy of the Blockchain, which is updated every time a new transaction block is added.