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Blockchain has been boasting of a nearly impenetrable system with some of the most innovative ways of ensuring zero susceptibility to cyber-attacksSince they are based on distributed ledgers that focus heavily on consensus from multiple ‘witnesses’, breaking in isn’t the easiest task on hand. 

Sounds a little too good to be true? Read on to find out why it just might be ambitious enough to be true!  


Data encryption using hashing algorithms is known as Hashing. Here, the algorithm takes in an input of any length and gives an output string of a fixed length. In addition to encryption, hashing also helps to index the existing values in a database, thus simplifying the search functionality.  

Blockchain uses the Secure Hash Algorithm 256 (SHA256) for its encryption; that is, this algorithm can take in a string of any length and convert it into a secure and shortened 256-bit version.  

Digital Signatures 

Like real-life handwritten signatures, digital signatures are used to validate the authenticity of a message and, at times, encrypt them as well. The typical working of a digital signature involves the usage of a pair of ‘linked’ keys, a public and a private key. The public key is used by the other users to access the sender’s message and the sender uses their private key to sign off on this message.  

Data encryption using digital signatures is a two-step process, where the first step would be to generate and encrypt a one-way hash for the sender’s message, and the second step would be to decrypt the incoming message using the relevant hashing algorithm and the public key. 

Consensus Algorithm 

True to its name, a consensus algorithm helps the participants of a decentralized structure reach a consensus or agree upon a certain set of rules for functioning efficiently. Let’s talk about the two most popular consensus algorithms today: 

  • Proof of Work (PoW) 

  • Proof of Stake (PoS) 

In the PoW algorithm, the miners are given a mathematical puzzle to solve. The first one to do so successfully, is rewarded and given the privilege to authenticate the transaction to be added to the blockchain. Once the transaction is authenticated, other copies of the distributed ledger update themselves accordingly. This algorithm is one of the best when it comes to maintaining anonymity and integrity in the blockchain. 

In the PoS algorithm, the weight of a vote is determined by the number of coins at stake. That is, the higher the number of coins at stake, higher is the weight of the vote. The biggest disadvantage to a PoS consensus is the risk of a 51% attack. This means that there is a slim chance of a group of miners owning more than 50% of the ‘voting’ power and using that to influence the validation of transactions. While this is still considered a hypothetical situation, it is taken very seriously, especially since a fully functional PoS setup is still in the nascent stages.