Are you wondering what blockchain technology is? Do you want to know how it works for cryptocurrency systems? Or maybe you just want to know how secure blockchain is. If you have any of these questions, keep reading this article to have them answered!

Let’s review what crypto blockchain technology is. Blockchain is nothing more than a digital ledger of all transactions. It uses cryptography to ensure security and authenticity. Now, let’s go through some of the most frequently asked questions about blockchain in cryptocurrency.

What is blockchain technology?

Blockchain technology is a type of decentralised network that uses cryptography to record and verify all financial transactions. A peer-to-peer network of computers verifies each transaction. As a result, all financial transactions are stamped with their date and are added to a chain of data that you cannot change.

Bitcoin is the primary example of blockchain in cryptocurrency. Virtual currencies like Bitcoins are private, and there are no traditional financial institutions involved in transactions. Bitcoin transactions are confirmed by nodes located all over the world using computer algorithms called bitcoin mining.

Blockchains record monetary transactions and other kinds of data, like location and additional information. With the help of these systems, we can track the origin of products and trace their path from shipment to delivery. Blockchains also allow us to track the source of contamination outbreaks. By using crypto blockchain, we have the potential to create a social network that can support millions of users at once.

How does blockchain work?

Crypto blockchain works by establishing a decentralised network where all participants keep a copy of the blockchain. New blocks are mined and must be approved by the network to be verified. Each node is a computer that verifies the new block and adds it to the chain. A block has a timestamped digital signature but does not contain the identities of the parties involved. The block is then transmitted across the network, where it is verified by the nodes and completed with a match of the private keys.

How is blockchain used in cryptocurrency?

The use of printed currency is regulated and verified by a central authority, usually a bank or government, but Bitcoin is not controlled by anyone. Instead, transactions made in bitcoin are verified by a network of computers. In the case of Bitcoin, and most other blockchains, computers that successfully verify blocks are rewarded for their labour with cryptocurrency, commonly referred to as mining.

In order to make transactions on the Bitcoin network, participants must run a program called a wallet. Each wallet comprises two unique and distinct cryptographic keys: a public key and a private key. The public key is the location where transactions are deposited and withdrawn. This is also the key that appears on the crypto blockchain ledger as the user’s digital signature. A user’s public key is an abridged version of their private key, created through a complicated mathematical algorithm.

Is blockchain secure?

A key design principle of crypto blockchain is that users share data without a third party. This is possible due to the use of innovative rules and complex math to store data. In addition, blockchain generates trust without a third party, which makes it invulnerable to security fraud and cyberattacks. But as with all forms of technology, there are some risks. A breach of the security of a blockchain can result in data loss, revenue loss, or even worse.

The rise in popularity of cryptocurrencies has encouraged cybercriminals to find innovative ways to attack the underlying crypto blockchain. One of these ways is the “51% attack”, which has evolved in recent years and has been quite successful. Numerous 51% attacks have taken place in recent years.

Blockchain: Applications

Although many people have doubts about cryptocurrency in India, there are many uses of blockchain technology beyond just the financial world. Some industries are already using blockchain technology for money transfers, financial exchanges, lending insurance, real estate, secure personal information voting, government benefits, securely sharing medical information, artist royalties, non-fungible tokens (NFTs), logistics and supply chain tracking, secure Internet of Things (IoT) networks, data storage. Companies including Walmart, Pfizer, Siemens, and Unilever are using blockchain technology to automate the transfer of assets and track the delivery of goods. In addition to the use of blockchain in cryptocurrency, the technology is being used in banking, digital rights management, and venture funding.

Blockchain: Immutable or Hackable?

A hack in cryptocurrency systems can mean many things. In simple words, if an attacker is able to exploit some area of a chain, smart contract, exchange, or illegitimately withdraw cryptocurrency, it would be deemed as a hack or stealing. When it comes to blockchains that use proof of work, 51% of attacks involve the attacker being able to gain control of more than 50 percent of the hashing power. By doing so, they can manipulate the data in the blockchain.

However, it’s almost impossible to pull that off in established blockchains. This phenomenon has been experienced by some small chains that are not really decentralised.

Such attacks help hackers use one digital token more than once by duplicating the file. 51% attack enables them to rewrite transaction history and carry out double-spending. In a double spend, transactions are erased once the goods are received. This means that the tokens can be used again.”

Each crypto account is locked down by unbreakable cryptography and a private key — a string of letters and numbers — that serves as an identification code for each crypto account holder. But hackers have shown that blockchains are not immutable. A poorly coded smart contract can be hacked by someone sending certain instructions to it. In short, the smart contract itself can be hacked, but not the crypto blockchain. If hackers get access to a wallet, they will be able to crack the private key to the account, which is another way of crypto hacking. The blockchain is immutable. Even in these hacks, the blockchain is mostly not compromised.

Legal Aspects of Blockchain & Cryptocurrency in India

Under Indian laws, blockchain is governed by the general laws of India, including laws relating to contracts. There are no specific laws relating to blockchain or cryptocurrency in India. Still, blockchain technology is being adopted practically by all, i.e. government and private entities, including banks.

Entry 36 and 46, List I of the Seventh Schedule of the Constitution state that the central government shall have the power to legislate currency, coinage, legal tender, foreign exchange, bills of exchange, cheques, promissory notes and other instruments, respectively. Section 22 of the Reserve Bank of India Act, 1934 mandates that the RBI shall have the sole right to issue banknotes in India, and the provisions of this Act shall apply to banknotes unless a contrary intention appears.

A virtual currency like Bitcoin is a stateless digital currency in which encryption techniques are used to regulate the generation of currency units and verify the transfer of funds, operating independently of a central bank like the Reserve Bank of India, rendering it immune from government interference. Accordingly, virtual currencies like Bitcoin are not banknotes and are not considered legal tender in India.

If you want to know more about the world of cyber laws, data protection laws and cybersecurity, you can join our cyberlaw course in India.

At Cyberra Legal Services, our expert data privacy & cybersecurity team has collectively spent years delivering dedicated techno-legal services to our clients. Over the years, our proud team has handled all kinds of cyber world issues across every industrial sector with finesse to make us a premier cybersecurity organisation.