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Security and Privacy in Blockchain

Security and Privacy in Blockchain

In this article, we will learn the fundamental concepts of security and privacy in blockchain, with relatable examples, to facilitate a comprehensive understanding of these essential concepts.

Encryption and Hashing: Safeguarding Data with Advanced Techniques

Encryption and hashing are two advanced techniques used to maintain data security and integrity on the blockchain. While they often work together, they serve different purposes in protecting information.


John writes a secret letter and puts it in a locked box. Only people with the right key can open the box and read his letter. This is the basic idea behind encryption.

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In other words, encryption is the process of converting readable data into unreadable format that can only be deciphered with the right key. Encryption safeguards sensitive information from unauthorized access.

You can turn unreadable data back into its original form, readable data, in a process called decryption.


To protect her information, Mary uses a unique fingerprint for each document; a slight change would produce a completely different fingerprint. Hashing works in the same way.

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This technique will take input data and generate a fixed-size string of bytes, or a hash. The hash is a digital fingerprint for the block's data, including transactions, the previous block's hash, and a nonce (a random number). If there is a minor change in the data, the hash will look totally different.

Unlike encryption, you cannot turn a hash back into the original data. The information won't be changed or tampered with, so you can ensure its trustworthiness.

Now let’s consider a simple example of hashing on the blockchain. There are three friends: Anna, Bob, and Chris. They share their expenses using a ledger.

Bob pays Anna $5 for lunch, and this transaction is added to a block with a unique hash of ABC123. Later, Chris pays Bob $10 for a book, creating a new block that includes the previous block’s hash (ABC123) and generates its own unique hash, DEF456. If someone tries to alter the transaction in the ledger, it will change the hash and disrupt the chain. The blockchain network will detect and reject the change to ensure the integrity of the shared ledger.

Public Keys vs. Private Keys: Your Key to Secure Transactions

Public and private keys play an important role in transaction security and user privacy. These keys work together to create a trustless digital identity for users within the decentralized system.

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Public keys

Everyone has a mailbox at home with a unique address to share with others to send letters or packages. A public key is similar to that mailbox.

A public key is an alphanumeric string that you can share with anyone, and they can send you digital assets such as BTC, ETH, USDT, XRP, and DOGE in a secure and private manner. This key is generated through complex mathematical algorithms to encrypt data and verify digital signatures.

Example: When you create a Metamask wallet, you are assigned a public key to receive funds from others.

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Private Keys

A private key is a secret and unique alphanumeric string that is closely guarded. It is used as the password to grant access to your digital wallet.

For example, to send funds to someone else, you need to sign the transaction using your private key. This action proves that you are the rightful owner of the funds and authorizes the transfer.

Be aware that if someone gains access to your private key, they will control over your digital assets. Make sure to secure your private key and cryptocurrency assets.

Check out our article if you want to keep your crypto safe on Bitget Wallet: The Future of Cryptocurrency: How to Safely Store Your Crypto: A Beginner's Guide to Bitget Wallet

Smart Contracts: The Future of Decentralized Transactions

Smart contracts are self-executing digital agreements with terms and conditions embedded directly into lines of code. In essence, smart contracts are stored on the blockchain to enable transparent, secure, and efficient transactions without the involvement of third parties.

How do smart contracts work, you may ask?

Smart contracts are created using specialized programming languages and deployed on a blockchain network (Solidity for Ethereum or Plutus for Cardano). Once deployed, the smart contract monitors the network for transactions that fulfill the predefined conditions. When these conditions are satisfied, the smart contract executes the specified actions, such as transferring funds.

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Let’s look at this simple example. Emily wants to rent an apartment. Instead of signing a paper contract, Emily and the landlord agree to use a smart contract on the blockchain. The smart contract contains terms such as the rental amount, rental deposit, and duration of the lease. Once they fulfill the contract's conditions (Emily pays a two-month rental deposit), the smart contract automatically transfers the apartment key to Emily.

For more information about smart contracts, refer to What Is the Smart Contract? Will the Computer Code Replace the Law in the Future?

Private Transactions: Ensuring Confidentiality and Anonymity

In general, blockchains are transparent and open their data to the public. However, some networks offer the option of private transactions to ensure that sensitive details are only accessible to the parties involved.

Private transactions use advanced cryptographic techniques to safeguard the details of a transaction. These techniques include zero-knowledge proofs, which enable a party to prove they possess specific information without revealing the information itself; confidential transactions, which encrypt transaction amounts so only the involved parties can view the values; and stealth addresses, which are one-time use addresses generated for each transaction.

Some of the well-known platforms that provide private transactions to users are ZCash, Tornado Cash, and Mimblewimble.

Example: Lara wants to send 1 BTC to Mark without anyone knowing. She decides to visit Tornado Cash, deposit 1 BTC, and create a secret Note. Lara shares the Note with Mark. He connects his wallet, enters the Note, and provides an address. After that, Mark can withdraw 1 BTC with ease, and their transaction remains secret.

Final Thought

Grasping the fundamentals of blockchain security and privacy enables a deeper appreciation of this technology's potential. As blockchain continues to evolve, we can expect even more advanced security and privacy features.

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Disclaimer: All products and projects listed in this article are not endorsements and are provided for informational purposes only.