In this lesson, we will explore three of the main pillars of blockchain:
The first pillar of blockchain technology is decentralization which puts the users in complete control of their own data and assets. Unlike banks and other institutions that have a central authority in control, public blockchains are open to the public and accessible by all. Decentralization makes it so that users do not have to go through a central authority to access information or interact with other users.
Decentralization provides increased security as the blockchain is hosted on a network of computers (also known as nodes), all of which contain updated copies of the ledger. Thus, if there is a problem with one of the nodes, the information will continue to be safe on the other computers which contain identical information. This adds to the blockchain’s security by making it virtually impossible to hack the system.
Next up is transparency. Transactions on a public blockchain are stored on a public ledger that is accessible to all. Even though the transactions on a blockchain are public and transparent, the users’ identities are kept private through cryptography.
With cryptography, a transaction is encoded with a key (using encryption) so that only the receiver can decode it (using decryption). Even though the key is visible on the network, no personal information is associated with this key. So although the blockchain is transparent, it also allows for the privacy of users.
This level of transparency combined with privacy adds an additional layer to the system’s security.
The third and final pillar of blockchain is immutability. Immutability means that once information is added to a block, it cannot be changed. As we learned in Lesson 1: Blockchain Basics, blockchain is a technology that serves as a secure digital ledger that stores information.
New information is stored as blocks of data, linked to the parent block in a chain-like manner. Thus, each new block of information contains the previous block’s data, making it nearly impossible to tamper with. This is because each block of information is stored across a vast network of computers, and every single block (stored on every computer) would have to be changed in unison in order to alter the blockchain.
- The first pillar, decentralization, puts the users in control of their own data and assets.
- The second pillar, transparency, allows transactions on a blockchain to remain public for accountability while at the same time providing privacy through the use of cryptography.
- The third pillar, immutability, means that a block cannot be changed once information is added.
- These three pillars combined add to a higher standard of blockchain accountability, security, and autonomy.