User:Trueedits1009/Privacy and blockchain

Peer-to-peer network
Blockchain technology arose from the creation of Bitcoin. In 2008, Satoshi Nakamoto released a paper describing the technology behind blockchains. In his paper, he explained a decentralized network that was characterized by peer-to-peer transactions involving cryptocurrencies or electronic money. In typical transactions carried out today, users put trust into central authorities to hold their data securely and execute transactions.

In large corporations, a large amount of users' personal data is stored on single devices, posing a security risk if an authority's system is hacked, lost, or mishandled. Blockchain technology aims to remove this reliance on a central authority. To achieve this, blockchain functions in a way where nodes or devices in a blockchain network can confirm the validity of a transaction rather than a third party. In this system, transactions between users such as sending and receiving cryptocurrency) are broadcast to every node in the network. Before the transaction is recorded as a block on the blockchain, nodes must ensure a transaction is valid. Nodes must check past transactions of the spender to ensure he/she did not double spend or spend more funds than they own.

After nodes confirm a block is valid, consensus protocols such as proof of work and proof of stake are deployed by miners. These protocols allow nodes to reach a state of agreement on the order and number of transactions. Once a transaction is verified, it is published on the blockchain as a block. Once a block is created it cannot be altered. Through blockchain's decentralized nature and elimination of the need for a central authority, user privacy is increased. Peer-to-peer networks allow users to control their data, decreasing the threat of third parties to sell, store, or manipulate personal information.

After Satoshi Nakamoto spurred the creation of blockchain technology through Bitcoin, cryptocurrencies rose in popularity. Cryptocurrencies are digital assets that can be used as an alternative form of payment to fiat money. In current financial systems, there exists many privacy concerns and threats. Centralization is an obstacle in typical data-storage systems. When individuals deposit money, a third party intermediary is necessary. When sending money to another user, individuals must trust that a third party will complete this task. Blockchain decreases the need for this trust in a central authority. Cryptographic functions allow individuals to send money to other users. Because of Bitcoin's widespread recognition and sense of anonymity, criminals have taken advantage of this by purchasing illegal items using Bitcoin. Through the use of cryptocurrencies and its pseudonymous keys that signify transactions, illegal purchases are difficult to trace to an individual. Due to the potential and security of blockchains, many banks are adopting business models that use this technology.