Last updated: December 3, 2019
Satoshi Nakamoto, an anonymous identity, published Bitcoin white-paper in 2008. Blockchain has gained great attention, investment, and development within Fin-Tech because it solved the problems associated with internet transactions and trust. Blockchain followed privacy by design strategy. Nakamoto's paper shed light over trust in a trust-less environment. The Bitcoin protocol helped to solve issues such on security, privacy, and trust which technologists have been working since 1980s. Satoshi Nakamoto's paper outlined a protocol that created a peer-to-peer, electronic cash system using digital currency, now known as Bitcoin. Although some are sceptical of Bitcoin’s success as a legitimate currency, the technology that underlies the digital currency has thrilled technologists. Financial institutions began to recognise its disruptive capabilities, and venture capital began to pour into the new sector of technology.
Authentication and Authorisation
Authentication and authorisation are done using cryptography. A cryptographic chain is authenticating wallet access and authorising the payments.Blockchain users could utilise hierarchical deterministic wallets and the pay-to-contract protocol, which allow for the creation of publicly unlikable addresses supporting on-demand auditing. Blockchain wallets are used. Coins reside in the wallets. Authentication is used to ensure the ownership of the wallet. A wallet will have a private key. Along with private key, the wallet could have pass-phrase based authentication.
Authorising a payment is using a cryptographic signatures, public key-private key encryption. Decentralised public key infrastructure (PKI), which will link identities of persons and entities to their corrosponding public keys. PKI could be a part of the blockchain specification, or as a separate overlay protocol. PKI would allow for legally recognised value transfer and asset issuance.
Encryption and ECDSA like algorithms provide identity and valid user access to data. Ensuring security and trust were in minds of Blockchain implementations. Blockchains depend on distributed copies Blockchain data. Data synchronisation is essential to ensure data synchronised concurrently.
In practice mega bitcoin farms, exchanges and centralised online wallets are adopted by the users for convenience. That tendency will result in concentration of stored private keys. steal the user private key, means they can steal the identity of user which cannot be recovered. That results in loss of asset. For example, in February 2014 Mt. Gox, the world third largest Bitcoin exchange got 850,000 bitcoins stolen; The company declared bankruptcy.
If a miner or a mining pool controls 51 percentage of blockchain network computation resources, they can control and change blockchain content. A person or an organisation, who have access to very much computation power, the transactions can be traced back. An example is Silk Road, a website to buy and sell illegal drugs used bitcoin for its payments. FBI, who had enough man-power and computation power took down Silk Road by end of 2014.
Blockchain based payments were revolutionary. since it introduced a fairer way to establish trust in a trust-less environment. But It also introduced some usability issues such as carrying a 100 GB transaction data, safeguarding private key, mathematical problem solving complexities - which result in long duration to ensure transaction.
Unlike other fin-tech platforms, blockchain based payments ensures privacy for a great degree. But, for a big organisation with enough computation power could reveal identities associated.