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Network Security 101

Network Security 101

Since its launch in 2009, Bitcoin has always been one of the most secure networks available. So far, there has been no reports of the Bitcoin blockchain and network being hacked.

As part of our "Prosper 101" educational series, we explore blockchain network security and explain exactly what makes Bitcoin so secure.

What are the key pillars of blockchain security?

Blockchain networks, including but not limited to Bitcoin, are underpinned by several core principals, which serve as a roadmap for the various stakeholders – developers, engineers, users, and organizations – engaged with blockchain technologies to ensure the security and viability of the overall blockchain ecosystem.

1. Decentralization

Decentralization is one of the founding principles behind the Bitcoin network, helping to remove control from centralized entities and avoiding the need for third-party intermediary involvement. Decentralization also plays a crucial role in blockchain network security.

Decentralization can lessen the possibility of a 51% attack occurring. A 51% attack is a network attack that takes place when an entity or group controls more than 50% of the network, which would allow them to alter the blockchain.

By spreading control across a distributed network of participants (often known as nodes), blockchains such as Bitcoin can reduce the system's points of weakness and limit the likelihood of a malicious attack taking place.

Decentralization can also make a blockchain resistant to censorship and provide a trustless environment in which network participants do not need to know other participants. This increases anonymity and avoids reliance on third-parties.

2. Cryptography

Blockchains use cryptography to keep information pseudonymous, unalterable and verifiable. These advanced encryption techniques can secure assets, including Bitcoin, from unauthorized access, while maintaining user pseudonymity.

Blockchains also use "transaction hashing" to increase security. A transaction hash is a unique identifier that consists of a range of digits and alphabets that are assigned to every new transaction on the network. This transaction hash is proof that a transaction has been submitted and can be used to find the transaction on the ledger.

All details associated with a transaction – including the sender and receiver's address, timestamp and amount sent – are recorded and encrypted into a unique string of characters.

3. Consensus Mechanisms

Consensus mechanisms allow for decentralization and allow multiple participants (often known as nodes), to collectively validate transactions. They play a pivotal role in ensuring network security, although different blockchains utilize different consensus mechanisms.

Consensus mechanisms ensure that all network nodes agree on the contents of the ledger and the validity of transactions. They can protect the network against fraud, manipulation and attacks, without relying on central authorities. These mechanisms can also be used to guarantee the immutability and accuracy of data on the blockchain, preventing information from being tampered with.

Even if some nodes are faulty, consensus mechanisms provide a fault tolerance, allowing the network to continue operating regardless.

4. Immutability

Blockchain transactions are immutable, which means that they cannot be altered once complete. Blockchain ledgers are a complete history of every transaction, which can be used to increase trust, transparency and traceability.

Immutability can enhance network security by stopping malicious actors from making unauthorized changes to the ledger. This limits fraudulent activity and lessens the possibility of cyberattacks occurring.

How is the Bitcoin Network Secured?

Bitcoin is a highly decentralized blockchain network, with no single, centralized entity overseeing it.

It uses a transaction hashing algorithm, known as SHA-256, to verify transactions and regulate public addresses which provides Bitcoin with additional levels of security.

Bitcoin also uses a Proof of Work (PoW) consensus mechanism to validate transactions, with Bitcoin miners needing to solve complex cryptographic puzzles in order to validate blocks in the blockchain. The computational power (also known as hashrate) required to solve these puzzles is incredibly high, and the network automatically adjusts the difficulty of puzzles to maintain a consistent block creation time.

For these reasons, Bitcoin remains secure, immutable and censorship-resistant.

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