You’ve probably already heard of Bitcoin, the biggest cryptocurrency in the world right now. But do you understand what it is? Do you actually know how it works? If not, then I can help you.
What is a blockchain?
Simply put, a blockchain is just a list of transactions. If I give someone bitcoin, then that transaction is in the blockchain. It’s called a blockchain because there are blocks of code for each transaction, and they’re linked together in a list called a chain. You might be thinking, “Well, why does it exist?”. But first, I have to tell you the difference between centralized networks and decentralized networks.
A centralized network is where 1 person or organization has all the power over what to do. An example of this is a bank. Many people put their money into a bank, and the bank is supposed to give it back if they want it back. But, if 1 person in the bank is corrupt, they can purposefully give your money to someone else. The same thing could happen if it is hacked. This system is vulnerable. A decentralized network is the opposite. Everyone has a copy of all the data (but they don’t know who owns it) on their computer. If someone tries to change the data, to maybe make it look like they have more money, the blockchain can recognize that this person’s copy is different than everyone else’s. The blockchain can then alert everyone that this person is trying to change the data, and they can get kicked out. This is much more secure.
What are the applications of blockchain?
Blockchain is a technology with many applications, some more obvious than the others. Cryptocurrency is probably the first thing you think of when you hear blockchain. It allows you to send and receive money securely, and it can be very valuable in the future if you invest now. Another application that comes to mind is in banking. If there is 1 bad actor in the system, they can be removed. Anything related to your identification can be done on the blockchain, as you can’t lose it, because everyone has a copy, and you can’t change it, because then you won’t be on the network anymore, and can be arrested. Your medical data can be on the blockchain too, allowing for quick access to your information when it is needed.
Can it be hacked?
There are many measures taken to make blockchain more secure. After all, that’s its entire model. It is more secure and 1 person doesn’t have all the power. However, blockchains have been hacked. One example of this is when Ethereum Classic was hacked. One person got control of over half the computers in the network, allowing them to rewrite the transactions. This allowed them to “double spend”, which is when they give the currency multiple time. Luckily, no amount of currency was stolen from people’s accounts. However, just because no harm was caused this time, doesn’t mean it couldn’t happen in the future. In fact, it has already happened. A popular coin exchange called Gate.io said that a hacker took $200 000 worth of cryptocurrency.
How could this happen? Blockchains are supposed to be unhackable. Well, you see, the more complicated a blockchain gets, the more chance there is for a small bug that can be exploited for millions of dollars. Bitcoin Core, Bitcoin’s main client for managing your wallet and making transactions, recently was scrambling to fix a bug that could allow hackers to gain much more money than they should have. Zcash, an extremely complicated cryptocurrency that allows private transactions, revealed that they too had an “cryptographic flaw” that could have allowed hackers to get infinite Zcash. Luckily, the bug was not exploited before it was fixed.
This was all with cryptocurrencies. Imagine if a hacker was able to get your medical information, your address, your credit card number, and millions of other people’s information. It’s terrifying. But it’s also happening outside of blockchain. There are millions upon millions of websites selling your information, your accounts, your everything. Blockchain is still a better way of storing whatever data you want to store. Just know that nothing is truly unhackable.
