Let’s explore how the two most established blockchains, Bitcoin and Ethereum, achieve security.
Cryptography
At the block level, peer-to-peer transactions are encrypted by asymmetrical cryptography, more commonly known as public-key cryptography. Public-key cryptography uses a set of public and private keys to confirm transactions are authentic and prevent them from being altered. While your public key is visible to anyone on the network, your private key is visible to only you. Through key generation, computer programs use cryptography to secure data by adding several degrees of randomness into the mix. This randomness makes keys incredibly difficult to decrypt, making data resilient in the face of brute force attacks, a hacking method that uses trial and error to guess combinations.
Immutability
Immutability ensures that transactional data stored on the blockchain cannot be altered in any way. Consensus mechanisms ensure that every change to the blockchain (i.e. new transactions) is recorded on the ledgers of every validating node. This reduces the risk of tampering and corruption, which can bring about other threats to the network. As a blockchain’s network grows its ecosystem of validating nodes and parties involved in governance, the resources required to disrupt the blockchain’s immutability increases and risk of such a disruption diminishes.
Consensus
Consensus describes the network’s ability to agree on the status of the chain at any given time. Rules for operating a public blockchain like Bitcoin or Ethereum are set through protocol governance and network validators acting in good faith to adhere to those rules. Established consensus mechanisms minimize the trust required by any two parties to transact with each other because the health of a network and its historic track record are publicly verifiable. As of right now, Bitcoin and Ethereum both employ a proof of work (PoW) mechanism to achieve consensus. However, soon Ethereum will complete a transition to a proof of stake (PoS) mechanism. Let’s dive deeper into how each of them contributes to blockchain security.
Proof of Stake
This consensus mechanism is used to validate cryptocurrency transactions and requires less energy than proof of work. Owners can stake their own cryptocurrency and are selected randomly to validate transactions in the PoS system. Proof-of-stake-based cryptocurrencies require validators to simply hold and stake tokens, therefore allowing transactions to process quickly and cheaply, which is essential for scalability. If a malicious actor or flawed node attempts to validate a block in a PoS system differently from the rest of the network, a portion of their stake is deducted by the network. Conversely, a reward is distributed to the node operator for each block validated by a node working in consensus with the rest of the network.
Proof of Work
This consensus mechanism, first introduced by Bitcoin, uses a significant amount of processing power to verify new transactions, hence the name “proof of work.” Miners compete with one another to solve a complex math problem. The miner that comes out on top then adds the newly verified block of transactions to the chain and claims their reward for doing so in the blockchain’s native currency. Although this method is energy intensive, it does have its advantages from a security standpoint. Mining secures the network by ensuring only those who can prove they have expended resources can append new transactions. Because of this feature, it is extremely expensive and difficult to attack an established proof of work system, like Bitcoin.
To conclude, public blockchains often take a multilayered approach to security. There’s a network level, validator level, and transaction level; top down. Without proper security measures in place, trust cannot be achieved.
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