Why is Blockchain Popular and Is it secure: a comprehensive guide?

Blockchain is an emerging technology with many advantages in an increasingly digital world. The prevalence of blockchain technology is nestled at the mechanism this technology is built on which makes it highly secure. Without the need of the central authority or any intermediaries, it provides the secure and transparent way of storing and sharing the information. Thus ensuring trust and fairness among all the participants who have access to the same data. By eliminating the need of middle man it makes the process of transaction efficient. Hence this technology becomes valuable for the augmentation of applications like cryptocurrency, supply chain management and smart contracts.

Why Blockchain is Popular?

Assume you wish to transfer some money to family or friends from your account. You would log into your online banking account and transfer the money to the other person using his or her bank account number. After the transfer, your bank update the transaction record. But it’s not that simple. There exist a potential threat, which most of us avoid.

These types of transactions can be tampered with at a great speed by the cybercriminals. Those aware of this truth become attentive of using them, hence the emergence of third-party payment applications in recent years. However, it is this vulnerability that instigated the invention of blockchain technology.

Also, every business requires some testing of records for data and transactions. Many times the information is handled internally or by some third parties like brokers, bankers, or lawyers, which increases the time and cost that a business has to go through. Fortunately, Blockchain has worked into this tedious process and facilitates faster movement of the transaction, thus saving both time and money.

Is Blockchain Secure?

New blocks in the blockchain network are always added linearly and chronologically. They are incepted at the ‘back’ of the blockchain network and once it is integrated, the previous block cannot be changed. It means if you change the data of the block it is in, the hash value changes and since the previous block hash value also depend on the next block, it also changes. Think blockchain technology as a bank vault, containing thousands of identical copies where changing any one of them would change all others.While the network would generally reject an altered block because the hashes would not match. Although all the blockchain are not impenetrable. Let us understand the security of blockchain with the help of some examples:

Example (1): For hacking the Bitcoin, a hacker would have to control over 51% of the mining power of a network to successfully bypass it in a 51% attack. This is extremely expensive and practically infeasible in larger and well-established blockchain networks. Since blockchain operates on a network of nodes therefore cybercriminals would need to compromise a majority of the nodes to execute an attack.

Example (2): When a hacker changes a transaction in a blockchain, he not only has to change the block being targeted but also all the subsequent blocks. This is not at all a small task, as it would take tremendous computational power to do so, and therefore, making such an attack impracticable within broader blockchains like Bitcoin or Ethereum.

Example (3): The open-source nature of blockchain allows others to quickly spot and report the flaw when a hacker tries to exploit a vulnerability in a smart contract. For example, the DAO hack on Ethereum was one such case where the contract had a vulnerability that hackers exploited, but the same thing resulted in a hard fork, reversing the hack and refunding the stolen funds.

Pros and Cons of Blockchain

For all its complexity, the potential of blockchain as a decentralized form of record-keeping is nearly limitless. From increased user privacy and heightened security to lower processing fees and reduced errors, blockchain technology might see applications beyond those above. There are, however, also some disadvantages.

Pros of Blockchain

1. Decentralization: No central authority can exercise whole control all therefore control is distributed to all participants.

2. Transparency: Public ledgers allow visibility of transactions. Therefore it is highly transparent as all participants have access to same data.

3. Security: Data is encrypted and immutable, reducing fraud. As changing the information of any block changes the hash of other subsequent blocks which is being rejected.

4. Efficiency: Since it eliminates intermediaries, therefore it enable faster transactions.

5. Trust: Ensures integrity through consensus mechanisms.

6. Cost Savings: Reduces costs by automating processes and cutting out middlemen.

Cons of Blockchain

1. Scalability: Limited transaction speed that is low number of transactions per second and high resource consumption.

2. Complexity: Requires technical expertise for implementation and maintenance.

3. Cost: High technology cost that is initial investment for setup and maintenance.

4. Regulation: Lack of legal clarity and potential conflicts with existing laws.

5. Immutability: Prone to false activities like dark web and also errors or fraud cannot be easily reversed once recorded.

How are blockchains used?

We all are familiar with the cryptocurrencies like Bitcoin, Ethereum and others which specifically runs on the foundation led by blockchain technology. As the blocks in the blockchain are capable of storing data of transaction, it sets the hallmark for reliance. But that certainly does not mean it is built only for cryptocurrencies as it can store different types of data as well.

There are some big companies adhering blockchain technology to improve effeciency. Companies experimenting with blockchain include Walmart, IBM, JP Morgan Chase, Goldman Sachs, Unilever, Simens etc. These companies are leveraging blockchain technology.

For example IBM developed ‘Food Trust‘, a blockchain based platform to bring efficiency in global food supply chain. It brings all the participants involved in food supply chain like farmers, processors, distributors, retailers, and consumers—to track and verify the journey of food products from farm to table.

However there are some prominent sectors experiencing the emergence of blockchain technology

1. Finance and Banking: If you talk about the industry that has seen massive boom with the emergence of blockchain is personal banking. Blockchain enables cross border payment with more efficiency. For example Ripple Net which is decentralized global payment network designed to facilitate fast, low-cost, and secure cross-border payments. And Bitcoin, Ethereum, and other digital currencies for global transactions.

2. Supply Chain and Logistics: It tracks goods from production to delivery like it was in the case of IBM’s Food Trust. This ensures authenticity of products and reduce the delays.

3. Healthcare: Since this technology is capable of storing data, it can be helpful in sharing and storing the medical records and patient’s data. It ensures transparency and data accuracy.

4. Governance: governments leverage this technology by ensuring transparent and tamper-proof elections. Also it can endure the records of property ownership to prevent frauds.

5. Cybersecurity: This technology enhances security through encryption and decentralization. It is very difficult to access the information for cybercriminals because if a cybercriminal tampers with blockchain data, the chain’s integrity breaks due to cryptographic hashing and hence distributed nodes detect and reject changes.

6. Real estate: Recording property rights is often inefficient, costly, and error-prone due to manual processes. Blockchain can securely and permanently store property ownership, eliminating physical records and ensuring accuracy, even in areas with weak governance or infrastructure.

Blockchain’s adaptability continues to grow, with new applications emerging in industries like insurance, retail, and even agriculture.