How safe is blockchain technology? It has proven to be a powerful technology for protecting the integrity of vital information. But that doesn’t mean it’s entirely safe.
The technology has become increasingly prevalent in recent years as the cryptocurrency markets have moved toward center stage. One reason for its rapid adoption is that blockchain is designed to offer unparalleled security to digital information.
In its short life, blockchain — also known as distributed ledger technology — and the cryptocurrencies it powers has seen its share of successes and failures. And as its applications spread, blockchain security has become more important — and not just for cryptocurrency investors.
Related: Understanding The Different Types of Cryptocurrency
How Blockchain Works
In some ways, blockchain technology is like the internet, which relies on a decentralized network rather than just a single server.
Blockchain uses a decentralized, or distributed, ledger that exists on a host of independent computers, often called nodes, to track, announce and coordinate synchronized transactions. This differs from traditional trading models that rely on a clearinghouse or exchange which tracks everything in a central ledger.
Each node in the decentralized blockchain constantly organizes new data into blocks, and chains them together in an “append-only” mode. This append-only structure is an important part of blockchain security. No one on any node can alter or delete the data on earlier blocks — they can only add to the chain. That the chain can only be added to is one of the core security features of blockchain.
By referring to the chain, participants can confirm transactions. It cuts out the need for a central clearing authority.
Blockchain Security Basics
Blockchain is not immune to hacking.
Blockchain is not immune to hacking, but being decentralized gives blockchain a better line of defense. To alter a chain, a hacker or criminal would need control of more than half of all the computers in the same distributed ledger (it’s unlikely, but possible — more on that later).
The largest and best-known blockchain networks, such as Bitcoin and Ethereum, are public, and allow anyone…