Blockchain in its simplest form is a method of transferring and keeping a record of data securely and transparently. The technology is currently most utilised by cryptocurrencies to log and ensure that all transactions are legitimate and secure. However, there are a multitude of other potential applications for blockchain that are currently being explored by companies and governments all over the world. Blockchain was first created in 1991 as a way of protecting digital documents from being tampered with. It was very rarely used, until in 2009 “Satoshi Nakamoto”, whose true identity is still unknown, altered the technology and created the first digital currency; Bitcoin. I will be using Bitcoin as the main example of blockchain based currency throughout, although there are many other cryptocurrencies that all vary and have different benefits and drawbacks.
A blockchain is often described as a ‘distributed ledger’, a list of financial records that many different parties, called nodes, have access to. In the Bitcoin blockchain, each block of data contains roughly five hundred transactions. These large blocks are then chained together to form the Bitcoin blockchain. Each block contains three elements. The Data, the hash, which is a string of characters unique to each block and acts like a fingerprint, and the hash of the previous block in the chain. The hash of a block is unique to the data stored within so, if any of the data in a block changes, the hash also changes. This means that it is easy to see if any block has been tampered with as the hash of the tampered block will no longer match with what the next block is expecting. However, modern computers are able to solve thousands of hashes per second so in theory someone could alter a block and then update the entire chain to hide what they had done.

This is where the proof-of-work system comes in. For any block to be added to the chain, an extremely complex cryptographic puzzle must be solved. These puzzles are worked on by all the different nodes in the network and take roughly ten minutes to solve. Once a solution is found, it is sent to all other members of the network to verify it. Therefore, in order to tamper with a blockchain, you would need to redo all the proof-of-work done for every block that you alter. If it takes all the computing power committed to solving these puzzles ten minutes per block when working together, there is little to no chance of a successful alteration of a blockchain many thousands of blocks long by an individual party. This is why data contained in a blockchain is so secure and can be trusted for massive transactions.

One of the major issues with protecting the Bitcoin blockchain in this way is the sheer amount of energy required to solve these puzzles. For each puzzle there is a 12.5 Bitcoin prize split between the computers who make progress on the problems. This means that currently there is roughly £100,000 up for grabs every ten minutes. This has obviously attracted many people, known as miners, to setup computers to earn a portion of each prize. However, these computers are always on so require a vast amount of energy to run. Estimates suggest that Bitcoin mining uses as much energy as Austria and has a similar sized carbon footprint as Denmark. Every single transaction made through Bitcoin consumes as much energy as the average house does over 21 days and makes 80 grams of electronic waste due to constant hardware changes. This is obviously not sustainable but there seems to be no way around the problem; for Bitcoin to be secure, computers must continue to be challenged by the problems and therefore must constantly be at the limit of their performance.
There three different types of blockchain that lend themselves to different applications. Public blockchains are currently most common with most crypto currencies being open source, allowing anyone to use, mine and access information. This allows the blockchain to be fully decentralized, with no single entity having authority over it. This lends itself to crypto currencies as it allows the currency to be stand-alone with no ‘bank’ as such associated to it. Public block chains are also extremely difficult for a government to censor due to this lack of physical ownership. However, the need to incentivise people for participation for this type of blockchain to function is extremely resource intensive. At the opposite end of the spectrum there are fully private blockchains. Members must be invited to join the networks and all data shared is only accessible to said members. Private blockchains are mostly utilised by governments and large corporations who have large amounts of sensitive data that needs to be heavily encrypted but also used and changed regularly. Private blockchains are far more centralised so the entity that sets it up has significant power over its data and members. Then there are hybrid blockchains, arguably the most useful in the modern world of data protection laws combined with desire for accessible data. A hybrid blockchain can be setup so the central entity in control can decide what information and power they make public and what stays private. For example, the NHS could have one system in which all of its spending is fully transparent to the public whilst only allowing personal data to be visible to the doctors and nurses who need to know at that time.
As the need for privacy and security increases, blockchain technology will become a vital to many organisations. It is currently transitioning from exclusive being utilised by crypto currencies to widespread adoption all over the world. The US air force have just announced they will be using block chain to combine data from old and new systems into one secure place. This sort of high-profile adoption of this technology could potentially lead the way towards a blockchain based future of cyber security and data management.

Josh Heyworth, Year 13.