How Blockchain Ensures the Legitimacy of Transaction Parties

Blockchain technology is fundamentally designed to verify the legitimacy of the participants involved in a transaction, and the method it uses for this is central to its decentralized and secure nature. This article explores how blockchain achieves this, emphasizing the importance of its permissionless and trustless characteristics.

Understanding Permissionless and Trustless Blockchain

Blockchain technology aims to establish a network that is both permissionless and trustless. This means that no central authority or third party can control or alter the system, and no node can be trusted more than others due to their unique rules or favoring certain users. This is in stark contrast to platforms like Ripple EOS, Neo, Nano, Ark, Lisk, Stellar, and Icon Ontology, which are permissioned and non-trustless.

In permissioned and non-trustless blockchains, rules and permissions are set by parent companies, which means that these organizations decide who can join the network and who can transact. This centralized approach can lead to various security risks, including centralization and the creation of attack vectors such as social engineering, coercion, threats, blackmail, lobbyism, and cartel building. This makes such platforms unsuitable for becoming global currencies due to their inherent insecurity.

The Role of Miners in Blockchain Verification

Bitcoin transactions are verified by computers called miners. Miners play a crucial role in ensuring that each transaction is legitimate and secure. They validate transactions using a unique cryptographic proof known as a signature. A valid signature confirms that the transaction has been authorized by the rightful owner of the funds. For a transaction to be considered valid, it must also include a legitimate destination address. This multifaceted verification process guarantees that no fraudulent activities can occur on the network.

Public-Key Cryptography and Address Verification

The foundation of blockchain address verification lies in public-key cryptography. An address in a blockchain is essentially a hash of a public key. This public key is part of a cryptographic key pair, with the corresponding private key being the unique identifier for the owner of the funds. Only the owner with the corresponding private key can authorize transactions involving their funds. In other words, money sent to a specific address can only be spent by the owner of the private key associated with that public key.

This system ensures that unauthorized individuals cannot spend funds that do not belong to them. It also eliminates the need for a central authority to verify ownership, which is a significant advantage in terms of security and decentralization.

Conclusion

The permissionless and trustless nature of blockchain technology is what makes it so robust and secure. By eliminating the need for a central authority and removing trust from individual nodes, blockchain reduces the risk of centralization and vulnerabilities. The use of miners for transaction verification and the principles of public-key cryptography for address validation further enhance the security and legitimacy of blockchain transactions. Understanding these principles is essential in fully appreciating the potential of blockchain technology in various applications.

Key takeaways:

Blockchain is designed to be permissionless and trustless, ensuring a decentralized network. Miners verify transactions using signatures and destination addresses for legitimacy. Public-key cryptography is used to ensure that only the rightful owner can spend funds sent to a specific address.