The Benefits of Blockchain Tech for Securing Digital Transactions & Data

The safety of data and online transactions has always been of paramount importance, especially in today’s digital ecosystem. The internet is already facing numerous fraud cases across the digital ecosystem, with countless numbers of hackers regularly breaching systems.

The prevailing cybersecurity risks have put individual’s and organizations’ reputations at stake, as the data collected from these hacking activities is misused for further fraudulent acts.

With everything now going digital and becoming vulnerable to hacking, one big question is whether it is possible to build a secured system online? The answer to that question is yes, it's possible to build secured systems online—with Blockchain.

But before trusting and saving our precious data on Blockchains, let’s understand what the technology really is about.

What is Blockchain Technology?

Many confidential data and information are still stored in e-formats, using a centralized database maintained on servers in a particular physical location. However, newer, more secure methods of storing confidential data and transactional information make use of a distributed ledger, which is essentially a shared database that exists across various computers on a peer-to-peer network.

Blockchain is a peer-to-peer network of distributed ledgers containing a growing list of data and transactional records, called blocks, that are linked using cryptography, which is a method of protecting information and communications through the use of codes, so that only authorized persons can read and process it. This means the list of records are secure on a Blockchain.

The transactions and data in a Blockchain, after a specific time period, get grouped in the form of a block that contains a timestamp and is further encrypted and stored in a decentralized database. This makes sure that the security, accuracy and authenticity of the data is intact and every block in the chain has a copy/timestamp of modifications.

Ultimately, the intended purpose of Blockchain, the revolutionary record-keeping technology, is to bring transparency, security, and decentralization in the storage and maintenance of data.

Key Functions & Benefits of Blockchain Technology

Here are three major benefits of Blockchain and reasons to use this revolutionary technology:

I. Decentralization

Before Bitcoin and BitTorrent came together, people were used to centralized services. The idea is very simple: You have a unified entity that saves records and you’d have to interact with one entity to get any of that data you required.

For example, when you search for something on Google, you send a query to the server which returns search results with the requested data. However, this data has several vulnerabilities:

• Firstly, a centralized spot allows potential hackers an easier opportunity to hit at a single spot/target for maximum damage.
• Any software upgrade in the centralized system affects the operations of the entire system.
• Sudden shut down of the system can leave everyone stranded and clueless of the breakdown in the system, which restricts access to the entire crucial data.
• Worst, if the system is corrupted, then the entire saved data will be destroyed along with it forever.

In a decentralized system using Blockchain, however, information is shared with everyone in the network and they own it. It is not stored in a single centralized spot that’s easier to target.

That means the entire data cannot be affected all at once, which makes the data more secure.

II. Immutability

With regard to Blockchain, immutability means the data, once entered in the system, cannot be fiddled with. This has proven very beneficial in many sectors, such as financial institutions and FinTech startups.

If you think about it, how many fraud cases could have been stopped if people just knew that the vital company’s data that they were looking to fiddle with was out of their bounds.

Blockchain is a connected list or records containing data and a hash pointer. A hash pointer is like a typical pointer, but instead of just containing the address of the previous block, it also contains the hash of the data inside the previous block.

Hashing means taking an input string of any length and giving out an output of a fixed length. Attempting any small change in any of the data will change the hash functions drastically. This is exactly how Blockchain system are ensuring immutability.

III. Transparency

Today, transparency is a concept that has been misunderstood by many. Why is that so?

Well, all the identifying information of a person is encrypted and safeguarded by complex cryptography, which is denoted only by their public address.

For example, if you wanted to see anyone’s transaction record, you will not see as “Mark sent 5 BTC,” instead you will see it as “1MF1bhsPBkBzzz9vpFYEmvwT2TbyCt7NZJ sent 5 BTC”.

Hence, even if the person’s real identity is hidden, you can still see the records that were done by their public address. This is a unique feature of transparency within a financial system. And this kind of encryption helps financial institutions safely demonstrate their transparency.

With the application of blockchain and cryptocurrency technology, you can easily check the transactions of any institution via their public address. This has forced complete truthfulness from big institutions, which was previously not possible and they never dealt with before.

Reasons to Integrate Blockchain Technology in Your Business

Some specific benefits of integrating Blockchain technology are:

1. Safety and confidentiality

Blockchain technology eliminates the involvement of third parties for processing or verifying transactions. The technology is actually helping in securing client’s data in digital format.

For example, several online background verification companies are leveraging Blockchain technology to mitigate security breaches, effective utilization to prevent frauds, and allow easy verification of personal documents.

As already mentioned, the technology uses a hash function. This function works by creating a fixed length of alphanumeric characters irrespective of the actual file size. The character limit is 256-bits long, which means it’s possible to verify the authenticity of data and documents.

2. One time verification procedure for members

With Blockchain technology, a participant will need to verify as a genuine user only once in the network that they do transactions and not every time. This leads to quicker, smoother and more trustworthy transactions between users as every member is verified.

3. Secure cryptographic hash

The hash sequence for every input is different and unique and it stores the details of exact time and date of transactions, with every detail of verification done on that record. As mentioned before, any change in the input will completely produce a different hash.

4. Reduced verification time

Compared to the old and time-consuming verification methods, Blockchain acts as a new dawn to the verification industry. Blockchain brings in more innovative, fast, and efficient ways to get the verification done, leading to time consumption moving from hours to merely minutes.

5. Transparency with privacy

Blockchain gives the member options to securely show their data as per the existing needs and requirements. This gives individuals managing personal data of organizations more flexibility. 

Moreover, not only is there transparency in the use of the technology, but also the privacy of personal data that a user does not want to share is also taken care of.

6. Proving authenticity of identity without disclosing information

With this technology, a user can prove their authenticity without having to disclose their sensitive data and information, or providing any identifying documents to prove their identity.

Simply doing some tasks within Blockchain systems and networks that the person is able to do only if they are who they claim to be can verify a person’s identity. Otherwise, failing to complete the task will lead to automatic rejection of their identity.

This concept is called Zero knowledge proof (ZKP) and it is very effective for authentication purposes, while assuring the privacy of personal data.

Conclusion

Given that the current market is characterized by rapid technological developments and stiff competition in the market, adopting Blockchain technology in your business can give you a marked edge over the competition.

A Blockchain-based identity verification system, for example, can offer an efficient method for businesses to manage and verify details of job seekers, workers, and even clients in the business. The verified profiles not only build trust among business partners and stakeholders, but also remove the need for intervention of external background verification agencies.

Blockchain powered systems utilizes a decentralized repository of distributed ledgers for storing validated data that cannot be tampered with without it being noticed. The systems effectively enable a hybrid approach with their state-of-the-art technology that includes a Blockchain secured database and an easily verifiable and shareable data management system.