Examples Of Data Protection In Bitcoin Blockchain
Bitcoin blockchain deals with assets of participants. This is an important area of human interaction since malicious users may try to trick or deceive fair participants. In order to prevent such behaviour and hazardous consequences, Bitcoin uses several protection layers. They include mathematical, organizational and informational methods.
Most of them were explained in the original white paper written by Satoshi Nakamoto. They are hashing, elliptic-curve cryptography, block and transaction structure, mining procedure, and a consensus achievement process. All these methods gave impetus to other similar projects in the crypto environment. Some of them still use the Bitcoin proposal with minimal changes. This group includes the majority of Bitcoin forks and projects with similar architecture.
In our previous article, we have shown several points of influence where security application is important. These points are:
- Account protection where an account stands for an address. Strictly speaking, addresses don’t correspond to accounts. However, from the point of view of protection, they’re the same.
- Transaction protection is intended to assure that correct transactions are accepted, while wrong transactions are rejected.
- Asset control algorithm is used to prevent the emission of coins for fraudulent purposes.
- Protection of transaction history implies that no accepted transaction can be changed or rejected after some time.
- Privacy protection means that asset transfers have to be as anonymous as possible.
There are three main approaches used to support the whole security system. They are elliptic curve cryptography, hashing, and blockchain operation algorithms. All of them can be changed to more modern analogues. This commonly happens with original blockchain projects that partially keep ideas from Bitcoin but use different implementations.
Let’s examine these approaches in more detail.
Examples of Security Measures
The Elliptic Curve Digital Signature Algorithm (also known as ECDSA) is used twice. First, it is applied when we want to receive a public key from a private one. The protection level is so high that it is almost impossible to break this encryption. Second, it is used when we want to prove that assets in the transaction are really ours. This task is dangerous because we should prove this without disclosing our private key. Fortunately, it is possible with the help of the ECDSA math approach.
Another approach called hashing is widely used in Bitcoin blockchain. It is applied in block connections, transaction addressing, transaction validation, light nodes support and consensus achievement.
Block connection refers to the global blockchain safety. The whole block content is put into a hashing function. The output is recorded as a component of the next block. Since it is impossible to predict a hashing input by its output, it is impossible to change previous blocks without recalculating their hashes.
Every transaction has data reworked as a hash. This result is united into the Merkle tree. This structure is used to link sequential transactions. The hash of the whole transaction is used as a single component that indicates the position of assets.
Hashing is also applied in the process of transaction validation. Both private and public keys are hashed, and these actions get mixed up with the ECDSA calculations. The final result allows to be sure that a proper user can get access to the transaction in a proper way.
Light nodes support
Light nodes support is used with the Bloom filter that uses the Merkle tree. Its main goal is to help light nodes, that do not store the whole blockchain, to find their transactions.
Consensus achievement is the last topic of hashing implementation. Hashing is constantly used in mining. Mining is the process of a constant search for an appropriate hash. When the hash is found, it means that all other participants must accept it by default. This is the way of finding consensus in the decentralized network.
The last approach (blockchain operation algorithms) includes organizational issues. It is dispersed across all processes concerning the system security. We can find it in the connections of blocks and transactions, in reaching consensus, and in many other spots.
When it comes to financial systems, the issue of data protection is crucial. Since Bitcoin implies that no one can trust each other, it uses a truly reliable approach to maintain the security. Other projects and solutions in the crypto environment use similar and sometimes the same methods. We will talk about them in the following articles.