Introduction To Data Protection In Bitcoin Blockchain
Data protection is one of most crucial issues of any IT area. Depending on a particular case, data protection is performed using different methods of encryption. Since blockchain is a special type of databases, it also uses proper protection methods.
These methods were partially described in the original paper by Satoshi Nakamoto. Some methods are intended to maintain privacy, others are used for password protection, yet others protect the consistency of total asset management all over the blockchain.
Before going on we should mention that all methods explained and described in this paper are applicable to any blockchain similar to Bitcoin’s. In fact, we can see similarity of approaches in any of Bitcoin’s descendants that are active at the moment. Moreover, other related solutions like Ethereum also use some of original approaches.
In this article, we will consider the way data is protected in the Bitcoin network.
General Protection Approaches
There are several areas of blockchain where data protection is important. Namely they are:
- Account protection. This means that all assets should be managed by their owners only. As a rule, account refers to a certain stable record associated with a single participant. In the Bitcoin blockchain, there is no such thing as an account. Still there are addresses managed by particular people, thus the protection of these addresses is considered here.
- Transaction protection. This means that no transaction should be removable from the blockchain as a result of a malicious activity. Since each transaction is the process of money transfer, it should be safe in all possible ways.
- Assets grow control. Bitcoin has a cap of total coins. It will be reached many years later, still it exists. So it is important to prevent both uncontrolled coin emission and malicious coin emission.
- Protection of transaction history. This topic concerns global blockchain protection against later changes. Blockchain composition rules and transactions are planned so that every transaction is linked to at least one of previously accepted transactions. That is why it is crucial to protect old transaction to ensure their sequence remains valid.
- Privacy protection. This section relates to personal data safety. Since Bitcoin is planned to be an anonymous asset management system, privacy is another key point where security is of high importance.
In order to support protection of all components mentioned above, several different methods are used. Their list includes mathematical, programing and organizational methods:
- Elliptic curve cryptography. This is the mathematical data protection method. It uses a heavy math function intended to encrypt target information. After its application, it is literally impossible to break the encrypted result.
- Hashing. This is an informational approach to data transformation. It uses a complex structure of logical operations. It accepts a line of bits as the input of various length. The output of a single function is always of the same length. This means that it is impossible to predict the input by the output.
- Blockchain structure. This is a couple of techniques applied to the blockchain content. Block connection, transaction connection and their mutual correspondence are developed in a proper way.
In Bitcoin, there are several methods used to ensure data protection. Each of them is usually used several times. In fact, methods explained above are used at least twice, and their particular application will be the topic of our next article.