Understanding Blockchain: Distributed Ledger
Bitcoin and Blockchain are used interchangeably in today’s IT solutions jargon. Bitcoin is currently the most popular cryptocurrency. You can think of cryptocurrency as a medium of exchange such as a US dollar, but without a physical form (cash)—not hard to imagine since cashless transactions have been on the rise lately. Transactions or exchanges of value using cryptocurrency are validated, recorded, and monitored through the Blockchain technology. This is where cryptocurrency departs from traditional currency. While Blockchain was invented for Bitcoin, technology trailblazers are heralding its potential for application in different fields, especially in cybersecurity. As part of our commitment to educate our clients on emerging technologies, our cybersecurity solutions experts will discuss the basics of Blockchain Technology in this article.
Houston Cybersecurity Solution: Records that are Resilient to Hacking
Traditional systems of facilitating transactions have a central authority (banks, private companies, governments) that keeps track of the different transactions taking place. This function can be decentralized through the use of a distributed ledger.
For example, a group of friends composed of Bettina, Joshua, Miguel, and Xena promised each other to save 5 dollars at the end of each month and deposit it to a common fund so that they can buy a 240-dollar playhouse by year’s end. The group elected Xena to keep track of the monthly payments, which she records in a ledger. In this scenario, Xena is the central authority. If Xena were to lose her ledger or make erroneous entries to the ledger then the monitoring of the contributions would be compromised.
In the next scenario, each of the friends would have their own ledger and would record not just their contributions to the fund but all of the contributions made to the fund. If one of the friends were to lose their ledger or make erroneous entries then they can still consult the other ledgers. This system is an example of a distributed ledger.
The advantages of a distributed ledger over centralized ones were mentioned in the discussion above. There is no one entity that controls the recording and validating of transactions thus no one entity can impose its agenda or motivations on the transactions. When you open an account in a bank, you are putting your trust in their system of recording. Of course, there are laws and other protections in place to protect consumers but for most of the time this relationship is based on trust.
Another advantage of distributed ledgers is that they are resilient because there is no one single point of failure. A hacker can alter the contents of a centralized database but in order to achieve the same thing on a public distributed ledger, the hacker has to alter all of the existing ledgers. This makes distributed ledgers particularly interesting to Houston cybersecurity solutions practitioners.
However, one challenge associated with distributed ledgers as IT solutions—which may have been apparent in the scenario above—is updating all of the existing distributed ledgers for every transaction. Does each ledger owner have to physically witness the transaction? That would be impractical. If, after a friend contributes to the fund, they text or call the other friends to update their ledger that they contributed, how sure are they that the others would believe their claim or that the others would remember to update their ledgers? Is there an IT solution that would make the process more efficient? This is the original problem addressed in the original Bitcoin paper through the use of Blockchain Technology that we will discuss in the following articles.
Understanding Blockchain Technology with Your Trusted Houston Cybersecurity Solutions Experts
Here at BHT Solutions, we are committed to making complex technology concepts digestible for our clients. This is aligned with our principle of customer-oriented service where effective Houston cybersecurity solutions are engineered with the ease of use of the end users in mind. Call us now to schedule a free, no commitment necessary, 1-hour consultation.