Why Blockchain Technology is the Safest for Financial Operations

The main point of executing some operations through a digital ledger is to let people, especially those who do not trust each other to share valuable data in a secure, tamper-proof way. That is why blockchains process and store information using sophisticated math and innovative software rules which are extremely difficult for hackers to disrupt and manipulate. And so this technology becomes one of the safest ways to conduct financial operations and transactions with some insignificant limitations, though.

Blockchain’s Security by Design

To examine blockchain’s safety and security, it would be better to look at the example of the Bitcoin blockchain. What makes this system theoretically tamperproof includes a cryptographic fingerprint unique to each block as well as a “consensus protocol,” the process by which the nodes in the network agree on a shared history. The fingerprint called a hash is being generated with a great amount of energy and time resources. It thus serves as proof that the miner who added the block to the blockchain did the computational work to earn a bitcoin reward.

The next step of the system’s security processes would be to verify whether or not the hash matches its block. When this is done and the nodes update their respective copies of the blockchain with the new block. That is known as the consensus protocol. The last but not the least security element is that the hashes act as the links in the digital ledger: each block comprises such of the previous block. That is why it is almost impossible to change any entry making the blockchain tamperproof.

Among other reasons of the blockchain’s well-known security are:

  • eliminations of frauds and thefts: since every transaction is recorded and cannot be changed, fraud and theft can be very easily monitored;
  • smart contracts: these totally eliminate the need for a traditional third party. The smart contracts are electronically programmed to take place, thus they are to take place with 100{3902b430229077027de5220bfd0ba1b9e53231995f524c42c471e54641b4e223} accuracy.
  • decentralization nature: given that the copies of the digital ledger are kept on a large and widely distributed network of nodes, it is hard to attack it and give a particular piece of information.

For whatever long the debates as to the blockchain’s security continues, there is no such protected and safe system to perform financial operations as the blockchain. Obviously, one has to treat it with the utmost accuracy as the transaction cannot be reverted. However, there are much more benefits of its usage available to the common people than the national banking system could have ever offered.

Leave a Reply

Your email address will not be published. Required fields are marked *