Danny Le – G2 Ops Innovation Scientist
Keywords – blockchain, technology, cryptocurrency, database, transaction, data, nodes, Non-Fungible Tokens (NFTs), security,
Estimated Reading Time: 5 minutes
What is Blockchain? Blockchain is a form of technology that provides a secure way of memorializing transaction data in an unalterable, electronic format. The data is configured into blocks that hold information about transactions. When new data is added, new blocks are added to the chain. This information block is distributed, monitored, and utilized by a decentralized, peer-to-peer network consisting of computers, databases, and cellphones that all work together to vet the information via a consensus protocol that verifies all the information. This information is encrypted securely by a cryptographic hash known as SHA-256, a digital fingerprint the network recognizes.
Blockchain stores data. This data can be accessed, filtered, read, and analyzed by multiple users all at once. But unlike standard databases, once data is ‘cemented’ into a block, it is unalterable and provides a reliable, irreversible timeline for the data represented in the chain.
How does Blockchain Work?
Someone requests a transaction. The request is broadcast to a Peer to Peer (P2P) network consisting of computers, known as nodes. The network of nodes validates the transaction and the user’s status using known algorithms. Once verified, the transaction is combined with other transactions to create a new block of data for the ledger. So then the new block is added to the existing blockchain in a way that is permanent and unalterable. The transaction is then complete. For an even deeper dive into Blockchain theory, go here.
Smart Contracts
A blockchain can contain more data than just transactions such as purchases. Code can be written to represent a contract as well. A contract between two parties can be written as code and inserted into the blockchain. The individuals involved can be anonymous, but the contract is in the public ledger. Certain triggering events can be written into the code, like and expiration date or a strike price that will trigger the contract to execute according to the terms written in the code. The triggering event is validated once all the conditions are met. This blockchain contract can be analyzed by regulators to understand activity occurring in the market all the while maintaining individual actors’ positions and privacy.
Non-Fungible Tokens (NFTs)
A Non-Fungible Token is a one-of-a-kind item existing in the cyberworld. The NFT (being an image, video, song, document, game, or other digital form) utilizes blockchain technology to certify its authenticity, ownership, and transaction history to verify its history. The singular identification structure of the blockchain renders the digital asset as non-fungible. In other words, the item is not interchangeable with any other digital asset, even copies of the original, resulting in a unique asset. This is possible by the data within the blockchain.
Benefits of Blockchain
All this technobabble invariable leads to a basic question: “What are Blockchains good for?”
The most basic benefit when it comes to blockchain coupled with cryptocurrency is transaction cost. With blockchain, there is no middleman (no bank, bankers, tellers, ATM fees) which instantly translates into lower fees. And the peer-to-peer network allows for fast settlement of transactions. Also, the transparency of transactions is a factor; every transaction is broadcasted, every node of the network creates their own copy of the event so validating each transaction occurs a multitude of times. And once added to the chain, the transaction is immutable and unchangeable.
Another benefit is security. Each transaction must and is validated by the network via the consensus protocol (SHA 256). Any invalid and/or fraudulent transactions are caught by the network and immediately invalidated. And because each node in the network creates its own verified copy of the transaction locked into the blockchain, there is no centralized official copy. This ensures any fraudulent version of the block is immediately recognized and eliminated from the system.
Applications
Make no mistake, though, blockchain is more than just cryptocurrency. The possible and real-world uses for this new technology are wide-spread and expanding.
This technology has found uses in the Financial Services industry, Industrial products and manufacturing, energy and utilities, healthcare, and government to name a few. How blockchain is used within these and other industries varies. For context, cybersecurity can utilize blockchain for password-less encryption, DDoS attack mitigation, and document verification. In Finance, blockchain can be used for cross borders transactions and payments. Now sending money to someone overseas doesn’t have to be as cumbersome as the old-style Western Union variety of last century.
But it doesn’t stop there. Blockchain security and authentication protocols can guard against voter fraud in voting systems as well. Because the blockchain protocols are decentralized, but secure, transparency in the election process will go up, at the same time security prevents fraud.
In the field of logistics, blockchain can be used to vet and verify activity, transactions, and supply lists all along the supply chain.
One of the most important applications of blockchain technology is the protection of Intellectual Property (the aforementioned NFTs). Thanks to the internet and current technology, the ubiquitous opportunities to recreate (and counterfeit) digital assets is prolific. Locking in the authenticity of a digital asset within its own source code makes it that much more stable and reliable as a unique item.
Final Words
As a cybersecurity company, G2 Ops is at the forefront of technology. Understanding and taking advantage of blockchain is one more way to positively utilize the technology to secure data. The improved accuracy of each transaction within the blockchain process reduces the possibility of human error and lowers costs. Its use of a decentralized network and independently verified data validation further ensures that tampering with data becomes less of a possibility. Storing vital data in a blockchain digitizes business in a way that was unheard of and impossible twenty years ago.
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