Introduction
Blockchain technology, or Distributed Ledger Technology (DLT), is cutting-edge technology, which can be defined as a decentralized, distributed ledger that registers the origin of a digital asset. The central characteristics of the concept of blockchain are decentralization, transparency, autonomy, immutability, and anonymity [1]. The most famous example of DLT is bitcoin, a digital currency, or a cryptocurrency created by Satoshi Nakamoto in 2008 [2]. While bitcoin remains a controversial matter due to creating a multibillion-dollar market of anonymous entities, blockchain is not controversial as it has worked flawlessly since the day of creation [2].
Apart from cryptocurrencies, the technology is being widely applied to financial and non-financial spheres, including private securities, insurance, the internet of things (IoT), the music industry, and anti-counterfeit solutions [2]. The present paper aims at describing how blockchain technology can be used to secure digital transactions in the future.
Security in Blockchain
Security in blockchain technology can be achieved using several methods. Traditionally, the security of transactions depends on the presence of a trusted third party, such as a bank. In bitcoin, security is achieved by executing proof of work (PoW) and consensus algorithms, which helps to avoid including a third party, which decreases the probability of security breach [3]. However, PoW has significant drawbacks, as it can be used only in large networks due to the possibility of a majority attack [1].
Moreover, PoW is extremely energy inefficient, which creates environmental concerns. Therefore, other methods of verification were introduced, such as proof of stake (PoS), proof-of-possession, and proof of credibility [3]. New types of verification can be used in combinations to defend networks from malicious users by increasing the costs of attacks and decreasing the incentives for attacks.
Applying Blockchain to Digital Transactions
DLT has promising features for ensuring the security of digital transactions, which was demonstrated in bitcoin. According to Puthal et al., “distributed public ledger is immune to any tampering as it is highly encrypted using advanced cryptography” [4, p. 21]. However, blockchain cannot be applied to all transactions due to some drawbacks. In particular, DLT cannot be applied to time-sensitive systems, as it takes considerable time for a block to be accepted into the blockchain, which is approximately 10 minutes for bitcoins [4].
A company may consider using the technology only if multiple parties frequently generate transactions dependent on a third party, which cannot be trusted [4]. Moreover, validation of transactions is prioritized, and data integrity is valued more than confidentiality and time of processing [4]. Even though the list of applicable industries is limited by these factors, blockchain can be used in various spheres.
Currently, there are numerous developments in the blockchain that will help to secure transactions in the future. For instance, IBM and Samsung united to create a proof of concept (PoC), which will be used for a new generation of the IoT [5]. NASDAQ announced that it would be using blockchain for protection and enhancing equity management capabilities [5]. At the same time, blockchain is proposed to be used for secure energy trading utilizing a credit-based payment scheme [6]. In summary, DLT is a promising technology that can help to ensure secure P2P digital transactions.
Conclusion
Blockchain is extensively discussed in the current literature due to its unique characteristics and capabilities. The technology provides highly-protected digital transactions due to the complicated encryption of blocks. While it can be used in most industries, however, since it currently has low processing performance, its use is limited. In the future, the utilization of technology can be expanded by addressing associated drawbacks.
Reference List
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- P. J. Taylor, T.D.Ali, D. Reza, M.P. Kim-Kwang, and R. Choo, “A systematic literature review of blockchain cyber security,” Digital Communications and Networks, 2019. Web.
- D. Puthal, N. Malik, S.P. Mohanty, E. Kougianos, and C. Yang, “The Blockchain as a Decentralized Security Framework [future directions],” IEEE Consumer Electronics Magazine, vol. 7, no. 2, pp. 18-21. 2018.
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- Z. Li, J. Kang, R. Yu, D. Ye, Q. Deng and Y. Zhang, “Consortium Blockchain for Secure Energy Trading in Industrial Internet of Things,” IEEE Transactions on Industrial Informatics, vol. 14, no. 8, pp. 3690-3700. 2018.