Technology and Security Analysis of Cryptocurrency Based on Blockchain

Blockchain technology applied to cryptocurrencies is the dominant factor in maintaining the security of cryptocurrencies. This article reviews the technological implementation of cryptocurrency and the security and stability of cryptocurrency and analyzes the security support from blockchain technology and its platforms based on empirical case studies. Our results show that the security support from blockchain technology platforms is significantly insufficient and immature. In addition, we further Zyskind and Nathan (2015) and Choi (2019) and find that the top ten platforms play critical roles in security support and have significant advantages in terms of funds, duration, and human resources. Moreover, these platforms provide computational resources and benefits to the consensus algorithm selection for blockchain practitioners. Second, encryption ensures the security of cryptocurrencies. On the one hand, the digital signatures identify the identity of the signatory and the transaction. However, the principle of the hash algorithm (SHA256) confirms ownership. Meanwhile, SHA256 is infeasible to compute in the reverse direction and is difficult to attack. Furthermore, the records in the blockchain can be queried by every participant, making the system information transparent and open reliable. Third, compared to the study of Fu and Fang 2016, we find that the blockchain structure is composed of security components and basic components of six layers that are independent and cannot be extended completely and have a certain coupling among them. Fourth, the underlying ledger structures of Bitcoin and DAG are highly correlated to their security. Specifically, we follow Sompolinsky et al. (2016) and detect that the structure of SPECTRE ensures network security and robustness from its block production, conflict resolution, and generated trusted transaction sets. Meanwhile, the voting algorithm of SPECTRE makes resolving conflicting transactions by calculating votes and ensuring the transaction information that is virtually unable to be tampered with possible. In particular, the security calculation power of SPECTRE can reach 51% and resist “double‐spend attacks” and “censorship attacks” effectively. In addition, the RDL framework of SPECTRE achieves security confirmation of transferring funds. Moreover, PHANTOM identifies evil blocks by employing block connectivity analysis and ensures its security. Eventually, we also expand the studies of (Sompolinsky et al., 2016 and Sompolinsky et al., 2017) and compare the basic characteristics of the protocols of Bitcoin, SPECTRE, and PHANTOM and find that protocols play imperative roles throughout the implementation process of cryptocurrency. In addition, the underlying ledger structure and consensus mechanism make up a blockchain while the confirmation time, throughput limit, and ordering are prerequisites for smart contracts.