Advice

Types of Insurance

Industry

Insurance Help

Resources

Log In

« Cybersecurity

Blockchain: Secure Transaction Technology

David Rubio Lopez shares important and relevant information for businesses on the use of blockchain technology.

3 mins readMay 24, 2021

Even though blockchain is one of the most secure data protection technologies today, we cannot take for granted that its security will always remain at the highest level.

Even though blockchain is one of the most secure data protection technologies today, we cannot take for granted that its security must always remain a top priority.

The word "blockchain" is often associated with a technological trend that serves to decentralize economic actions and operations in a way that users can trust.

Benefits of Blockchain

Blockchain technology has provided many benefits, such as reinforcing data security, increasing the efficiency and speed of transactions at an operational level. In turn, these have translated into significant cost savings. It is understandable, then, that blockchain is a technology that is here to stay but will constantly evolve.

Blockchain evokes several questions on everyone's tongue: What exactly is it based on? How does it work in practice? To what extent does it safeguard the security of transactions? However, before we can answer these questions, it's essential to understand the fundamental concepts that define blockchain technology.

What are blockchain's characteristics?

A blockchain's ecosystem comprises a block, a data container of digital records (or "transactions"). These blocks are joined in chronological order to form a continuous chain, hence the term "blockchain".

  • Each block contains a timestamp, and all blocks connect through hashes or codes generated through cryptographic algorithms. If any changes are made to the information registered in any given block, that block is not overwritten. Instead, a new block is created that identifies the change made and the specific date and time of the modification.

  • Each new block contains a list of new records, a timestamp, and a cryptographic digital signature of the previous block. As "old" blocks remain indefinitely in the system, new blocks are irreversibly added to the chain. It is practically impossible to alter or manipulate the data in a particular block without being undetected.

Given that blocks are distributed and maintained simultaneously through multiple systems, blockchain is widely known as the most prominent distributed ledger in existence. The network approves transactions before being verified.

Unlike the traditional approach of conducting transactions, blockchain eliminates the need for any centralized control. Instead, all transactions and records are decentralized and verified by the members of the chain and the system itself. This fosters confidence from its users since they can trust the data that undergoes a process of almost simultaneous multi-approval in real-time.

How does blockchain work?

Every time a new transaction (or record) is created in a blockchain, a new block is automatically generated, along with its date and time that comprises its timestamp. The timestamp refers to the moment when the block introduces a new record.

Likewise, every time an existing block is updated, a new block with its timestamp is created... and so on. The result is a single block of information, automatically linking to the previously available block, using its hash to validate any new or updated information.

With each new block, its information is sent to all connected computers and systems in real-time that participate in the blockchain network. These computers are known as "nodes".

Nodes are in charge of managing and preserving the most updated copy of the transaction's records, i.e., its history. In addition, nodes play a crucial role in keeping the network's integrity, as no node can make changes to an existing block without altering all previous blocks in the chain.

The node uses the previous block's hash to create a new block that serves as its private cryptographic key and the public cryptographic key of the subsequent node in the network.

Without a private key, it is not possible to create a new record or block. Thus, even though blockchain is one of the most secure data protection technologies today, we cannot take for granted that its security must always remain a top priority. Failing to strive for this would be irresponsible. That's because as blockchain technology evolves, its weaknesses and flaws will inevitably occur.

To avoid malware attacks or cyber-attacks, organizations should protect their blockchains from the beginning. This means ensuring different levels of security from the design stage through to the implementation of adequate authentication steps using cryptographic mechanisms.

Security-related technological risks constantly evolve and become ever more complex. This explains why analyzing and mitigating those risks poses such a big challenge in all companies.

Subscribe to stay up to date with all the business expert insights.

Your email address

Choose your Industry