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What is Blockchain Authentication?

Last Updated : 01 Jun, 2022
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Blockchain is a digital decentralized public ledger designed to record every data exchange on its network. Therefore for the security of data exchange on the network, blockchain flow’s a process that verifies a user with distributed ledger and also verifies the digital identity of the user at the same time to protect the passwords and data of the user, this process is known as Blockchain Authentication.

  • Blockchain authentication refers to the system developed for increasing the security of the users and verifying user identity and allows users to connect to the resources found on technologies of digital currency, transactions, cryptocurrencies, etc. 
  • It uses blockchain’s distributed ledger technology and authentication methods to enhance the privacy and security of authentication systems. 
  • An entire blockchain-based network is capable of having its own data integrity.
  • The personal information used to verify a user’s identity is stored on the block’s hash such as username or password. This will help to achieve a self-sovereign identity.

This article focuses on discussing the following topics in detail:

  1. Examples of Blockchain Authentication.
  2. What is 2-Factor Authentication?
  3. How Does 2-Factor Authentication Work?
  4. Why 2-Factor Authentication Important?
  5. Blockchain for 2-Factor Authentication.

Examples of Blockchain Authentication

Here are the five areas where blockchain authentication is used:

  • Financial transactions: Blockchain technology can be applied to all financial transactions. Because of the blockchain, financial security has been greatly improved. Basically, blockchain technology was developed to process and record all transactions on its network. Today, many banks are starting to use blockchain technology to improve the security of payments and transactions.
  • Supply chain: The blockchain supply chain can help participants record relevant information such as price, date, location, quality, certification, etc., so as to manage the supply chain more effectively. The availability of this information within the blockchain can improve the traceability of the material supply chain. Reduce losses from counterfeiting and grey markets, increase visibility and compliance of outsourced contract manufacturing, and potentially strengthen the company’s position as a leader in responsible manufacturing.
  • Healthcare: The traceability of medicines is very important in healthcare as the pharmaceutical industry is one of the most affected by counterfeiting in the world. Blockchain technology is helping the pharmaceutical industry securely track drug shipments to combat counterfeiting, Which is a major concern for the healthcare industry.
  • Cybersecurity: Cybersecurity is the protection of computer systems and networks from digital attacks and the protection of sensitive data in computers or databases. In Cybersecurity Blockchain can provide advanced security controls by using public key infrastructure to verify the identities of parties and encrypt their communications. Public key encryption in blockchain networks helps maintain user confidentiality.
  • Personal Identity: Since identities are decentralized on the blockchain ledger, blockchains give end-users more control over their digital identities. Blockchain provides immutable records for identity management and forensics purposes. Due to the decentralized nature of blockchain technology, data cannot be tampered with. Therefore, personal identities are secure on the blockchain.

What is 2-Factor Authentication?

2-Factor authentication provides an extra layer of security by adding one more layer of security to the existing layer of security. 2-Factor authentication involves the user entering the combination of username and the password and instead of getting straightway access to the account, the user will be prompted for one of the following information:

  • Something you have: This involves authentication based on the card details (credit/ debit card), hardware token, software token, or smartphones.
  • Something you know: This involves the user answering some extra piece of information like the answer to a secret question, or PIN (Personal Identification Number).
  • Something you are: This involves authentication using biometrics like keystroke behavior, fingerprint, retina, handprint, etc.
2- Factor Authentication


How Does 2-Factor Authentication Work?

A 2FA happens in the following steps:

  1. Enter username and password: In this step, the user is prompted to enter the username and password
  2. Validate username and password: The username and password are validated by the authentication server and if the credentials are correct then the user is eligible for the second-factor authentication. 
  3. Second-factor authentication: In this step, the user will enter the details as per the second authentication mechanism chosen.
  4. Validate second-factor authentication: The authentication server will validate the additional authentication information provided by the second-factor device and will confirm the user identity.

Let’s understand the above process using a simple example where the user tries to log in to a social media account.

Step 1: Enter username and password: The user will enter the username and password.

Step 2: Validate username and password: The authentication server has validated the username and password and the credentials are correct. The user is eligible for the second-factor authentication which PIN in this case.

Step 3: Second-factor authentication PIN: The user will enter the 4-digit PIN.

Step 4: Validate second-factor authentication: The authentication server will check the entered PIN and if it is correct the user will gain access to the account.

2-Factor Authentication working

Here User Access Account By PIN and Password

Why is 2-Factor Authentication Important?

There are several benefits of using the 2-Factor authentication:

Hacker Unable To Access Account

  • Increased security: 2-Factor authentical adds an extra layer of security to the existing security practice. Even if the hacker gets access to the username and password, it won’t be easier for the hacker to get access to the second piece of information like OTP or any biometric to get access to the account. Thus reducing the risk of the attack on the account.
  • Increased productivity: 2-Factor authentication enables employees to access corporate documents and third-party systems from any device without sharing any confidential information.
  • Reduction in fraud: Most fraud victims avoid visiting the websites from where they have experienced fraud even though the retailer is either unaware of the fraud or we can say wasn’t responsible for the fraud. The use of 2-Factor authentication on the website’s login and checkout pages helps to reduce such frauds and make customers feel safe and trusted.
  • Increased trust: 2-Factor authentication helps employees to access corporate data from anywhere, and helps users purchase goods from the eCommerce websites in a secure manner, thus building trust among the users that their account is protected and hackproof. Building trust is most important for building a long-term client network.

Blockchain For 2-Factor Authentication

The following points tell us how blockchain can enhance the privacy and security of authentication systems.

  • Data Security and Integrity: Blockchain provides excellent data security and integrity due to its decentralized architecture. Blockchain uses hashing technology to securely store information on its ledger. With no critical points of attack for hacking and entering into systems, this means that database breaches are no longer a major threat to identity systems.
  • Control over digital identities: Since identities are decentralized on the blockchain ledger, the blockchain gives its end users more control over their digital identities.
  • Immutable records: Blockchain provides immutable records for identity management and forensics purposes. Due to the decentralized nature of blockchain technology, data cannot be tampered with, so any changes are reflected on all nodes on blockchain networks, therefore blockchain became more secure as no one commits fraud on blockchain networks.
  • Leverage Decentralization: Blockchain is a decentralized technology that allows transactions between multiple parties without the involvement of any third party. Using blockchain, the sensitive information can be kept on multiple nodes on the blockchain network instead of being kept in one database.


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