While many naysayers of the blockchain revolution say that it is nothing different from traditional distributed databases, the technology offers multiple features that make it stand out from databases. For one, traditional databases can be protected to great lengths, they will never be as secure as using a permissioned blockchain for the same reason.
The security in numbers ramps up when multiple copies of the same data is maintained in a geographically discrete way, but blockchains offer more than a single dimension of security. As they were created for a financial instrument, there was a high priority on security, more specifically 100% uptime, immutability and transparency. The fundamental difference between the two lies in the way they are structured at the base.
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What Makes Blockchain Unique
Even as the basic structure of both systems seems similar, they hold a lot of differences. A distributed database will usually feature a group of synchronized databases that are spread out in terms of geography and jurisdictions. The synchronization is conducted with the help of a centralized server that keeps track of data across the databases.
These databases, called nodes, are the most important part of the network, as they not only keep it running but also hold most of the important information in the database.
The blockchain, on the other hand, has no single regulating party that synchronizes the history of the data across the network. Instead, this is done in a decentralized process through a process known as the consensus mechanism.
There are various different consensus mechanisms present in the blockchain world today, with the most popular of them being Proof-of-Work; the algorithm used by Bitcoin.
Upon a Bitcoin transaction occurring between wallet A and wallet B, the transaction is validated by nodes on the network. Then, it is added to the pool of transactions waiting to be packaged into a block, which is then added to a chain of previous blocks using cryptographic calculations.
This is the process that makes blockchains unique, they can function on the validation from the nodes of the network and do not require a centralized party to hold the trust of the network.
Effectively, this method creates a single shared truth of all transactions on the network, while not leaving any room open for attack. A clue the added security of the blockchain lies in its name; a chain of blocks.
Named ‘Blockchain’ For A Reason
The blockchain is called so because it is quite literally a chain of digital ‘blocks’. Blocks are a term used to denote the groups of transactions that are packed together so as to fit into the cryptographic puzzle of the network. To ensure that transactions, once conducted, are irreversible, Bitcoin, and many blockchains, use a proof-of-work consensus mechanism.
In a proof-of-work mechanism, there are a group of nodes that function to ‘mine’ blocks on the blockchain. Mining is the computationally-intense process through which blocks are validated and added to the chain.
This is done by solving a complex mathematical problem that is based on the transactions contained in the block. The process takes a lot of energy and ensures that transactions are immutable while offering a set of nodes that provide an additional layer of security.
Miner nodes are required to have a copy of the entire blockchain, which is something known as a full node synchronization. This ensures that even if every node in the world is shut down, miners will continue to be on the chain, provided they don’t leave.
Strength In Numbers (And Diversity)
To build security through redundancy, nodes were set up all across the world by cryptocurrency enthusiasts who lived there. They were also encouraged to mine, so as to secure the blockchain’s cryptographic processes. This has now left the world’s biggest blockchain, Bitcoin, as almost completely ‘unhackable’ in terms of downtime.
To shut the blockchain down in this situation, law enforcement authorities across the world will have to work together to physically shut down the nodes in a small time frame of each other. Only in this way can the blockchain be compromised by parties outside of it. However, a deeper problem can emerge from within the network, and it seems like it already has.
A Bleak Outlook?
While industrial level blockchains have already moved past proof of work as a consensus mechanism due to its wasteful nature, Bitcoin itself is vulnerable to an attack. Currently, over 51% of the computing power on the chain is rumoured to be held by one party known as Bitmain.
What this means is that Bitmain could conspire and begin reversing transactions on the chain, meaning the blockchain is immutable no more. However, it is left to see whether they would take advantage of this, as it will be financially destructive to the company as a whole.