Article by Karthik Reddy, community manager at Webmastersjury
According to Sutton’s Law, thieves go where the money is.
Bitcoin, the leading cryptocurrency in circulation, faces down a unique set of security concerns through innovations and structures which are influencing how cybersecurity experts will face new threats. This infographic, “58 Insane Facts about Bitcoin,” provides insight into how blockchain is helping against cybersecurity threats.
While the concept of blockchains was first described in the early ‘90s, the person or team under the pseudonym Satoshi Nakamoto transformed the idea and applied it to the Bitcoin system when it was created in 2008.
But what are “blockchains”?
When an information transfer – a “transaction” - takes place, its digital information is validated by comparing it with previously validated source transactions. Once approved, this “block” is connected to the chain of transactions blocks which were the “parents” of this transaction block. Combined together, they create a “blockchain.”
The real power in blockchain technology is through its distribution. The transactions inside one blockchain could be altered, opening the possibility of fraud or theft. However, in a distributed blockchain system, all the blockchains would have to be altered at their storage sites, or “nodes”. Add in cryptography measures, and alteration of a blockchain becomes nearly impossible.
To get the distributed system set up, Bitcoin’s Nakamoto made two other clever moves. He made the Bitcoin ecosystem code open source, and he set up a reward system for participants who update and validate blocks – called “mining”. This has encouraged the expansion of the ecosystem and the security of transactions.
Blockchains minus Bitcoins
Once the security features of the blockchain concept were realized, entrepreneurs and corporate leaders began exploring new applications. Some of the most exciting possibilities include:
Banking and finance
This was an obvious direction to go. The financial services industry spends billions on cybersecurity and fraud detection. It’s estimated the top 10 investment banks would save as much as $12 billion by implementing blockchain for their ledger transactions. Many banks are already using blockchain.
The huge file sizes and computing energy required for blockchain validation have been a hurdle to greater use in financial services, especially for consumer transactions. But that is about to change. Innovators are attempting to “scale” blockchains in a way which maintains security but greatly reduces file sizes. Their goal? Compete with the major consumer payment processors.
Blockchains can work with any form of information transfer. Smart contracts are a new frontier in applying the concept. A smart contract is automated and secure, allows anonymity and is executed without further human action – or human error. This new application of blockchains promises to reduce the risk of fraudulent billing, identity theft, or unauthorized account access.
One fascinating way blockchain protocols may be used to advance cybersecurity is in combating election fraud and hacking. Many of the challenges election systems face can be eliminated or greatly reduced through blockchains.
In particular, blockchain use could pave the way for digital and online voting. The process which secures a financial transaction for Bitcoin could also secure the record of each vote. Hacking and changing vote counts would be as difficult as falsifying a Bitcoin transaction – that is, virtually impossible. Once an eligible voter was verified, there would be no opportunity for an impostor to step in to vote, nor for the voter to cast multiple selections.
The blockchain concept has proven its value in the fast-moving world of cryptocurrencies. Its application to other cybersecurity challenges is already making an impact.