{"id":10366,"date":"2023-11-30T13:12:29","date_gmt":"2023-11-30T13:12:29","guid":{"rendered":"https:\/\/www.capitalnumbers.com\/blog\/?p=10366"},"modified":"2025-08-08T09:25:20","modified_gmt":"2025-08-08T09:25:20","slug":"blockchain-authentication-authorization-explained","status":"publish","type":"post","link":"https:\/\/www.capitalnumbers.com\/blog\/blockchain-authentication-authorization-explained\/","title":{"rendered":"Blockchain Breakthroughs: Transforming Authentication, Authorization, and Accounting"},"content":{"rendered":"\n

Blockchain has gained immense popularity in the tech world nowadays. But is blockchain worth such hype? Before understanding blockchain and its functioning in detail (technically), let’s analyze a real-world banking system<\/strong> for a basic understanding of how blockchain profits various related identities. Assume there is a bank called ‘X’ giving services to Wang, Nicolos and Andreas. Andreas and Nicolos are office colleagues and are regular customers of a Chinese restaurant run by Wang. One Saturday night, they decided to have some Chinese, and Wang’s restaurant was the obvious choice. After having a decent dinner, they asked for the bill and opted to pay online. Due to some issues, Nicolos requested Andreas to pay for him and assured him that pay him later. Andreas obtained the address (i.e., Anything that refers to the bank account number of Wang) from reception and paid the stated amount (the amount included the cost of the eatables they both had). The next day, Nicolos decided to pay Andreas for the last night and used the same bank service to pay Andreas.<\/p>\n\n

In the above story, there are two sections where entities are interacting with each other online. First, Andreas is paying to Wang, and second, Nicolos is paying to Andreas. Before starting anything, let\u2019s consider these questions for both scenarios. Who assures that the recipient addresses obtained by Andreas and Nicolos in both scenarios are designated to their desired address? (authenticity) and what is a guarantee that the amount paid to Andreas and Nicolos belongs to them? (authorization). The obvious answer is ‘X'(i.e., the bank), and no one will oppose this. But in this whole scenario, the fact that the whole trust among entities depends solely on the bank ‘X’ is also true. No matter what you do while you interact with other entities, the entire process will be governed by a solo source<\/strong>, that is, the bank here. Now, what if I say there is a technology called Blockchain that will not only profit entities regarding these issues but will also help the banks reduce their workload?<\/p>\n\n

\u201cThe blockchain is an incorruptible digital ledger of economic \ntransactions that can be programmed to record not just financial\n transactions but virtually everything of value.\u201d<\/i>\n \u2013 Don & Alex Tapscott, authors Blockchain Revolution (2016).<\/strong>\n<\/p>\n\n

1. Understanding Blockchain<\/h2>\n\n

Blockchain is a series of records of data that are immutable in nature, which is governed by a cluster of systems that are interconnected with each other<\/strong> and are not owned by a single entity, explaining why blockchain is a decentralized system (there is no central authority). The first ever blockchain was invented by Satoshi Nakamoto in 2008 and later was implemented as the first cryptocurrency called ‘Bitcoin’. We don\u2019t have a central governing authority; what about authentication and authorization discussed earlier? How can blockchain provide a solution to those issues?<\/p>\n\n

The answer lies in the architecture of blockchain. Authentication is the procedure followed to prove something (i.e., Anything considered) is real or valid. Simply stating authentication is verifying the identity of any user in the blockchain<\/strong>. Authorization is the process of providing access rights to the data or value that is being considered as per the situation. Want to know about these in detail before opting for blockchain development services<\/a>? Let\u2019s dive in. <\/p>\n\n

2. Why Are Blockchain-based Authentication and Authorization Important?<\/h2>\n\n\n

This is an important question to answer before understanding how blockchain helps in authorization and authentication. Let\u2019s consider Electronic Commerce (E-Commerce) to understand its importance. E-commerce has grown drastically in these few years and are playing a major role in people’s life. For any E-commerce site, privacy and security will always be major concerns<\/strong> as data regarding the product being bought and money paid for the product are all done online.<\/p>\n\n\n

Consider an E-commerce site, ‘XYZ,’ which is famous for buying gadgets. Imagine yourself going for a vacation with your friends while you just come out of your house to join your friends for the proceeding, your phone rings, prompting a message from your bank regarding the amount that has been paid from your bank for the objects you didn’t even buy, but it would be hard to explain it right. For any system, authentication and authorization are among the most important features, as these two things represent your virtual identity<\/strong> for that system.<\/p>\n\n

3. Methods Used for Authentication Nowadays<\/h2>\n\n\n

Various systems use different authentication methods for the users. But all have one thing in common; they all require a certain initial to do so. Various systems ask for different initials for using authentication, for example, things known by users such as passwords, biometrics, tokens, smart cards, etc.<\/p>\n\n

3.1 Drawbacks related to passwords as initials<\/h3>\n\n\n

While authenticating yourself in a particular system, you simply type down your initials. Now, in this particular situation, what are various ways of attacking the user? If you are in touch with the cyber security field, you must have come across attacks like spoofing and keylogging. Apart from these technical attacks, methods like social engineering and random guessing of passwords<\/strong> may also work if you are a bit close to the victim.<\/p>\n\n

For those who are unfamiliar with the terms,<\/p>\n\n