Thanks, in part, to the explosive rise in interest in Bitcoin and other cryptocurrencies, blockchain technology has been increasingly praised, promoted, and questioned by leaders of dozens of different industries. Blockchain is a versatile technology, capable of being used for many industries. Its most important feature calms some of the cybersecurity fears most consumers. However, there are issues with blockchain security that should be addressed.
Could it be a near-perfect system for exchanges of all types, or is there something we’re missing? As you might expect, there are some potential vulnerabilities with blockchain technology.
How Blockchain Works
Let’s start with a briefer on how blockchain works and how it’s developed in the past few years. It is a digital ledger that’s duplicated and distributed across thousands of individual computers. Thee are called “nodes.” Interactions between nodes collaboratively update this central ledger.
Each user has access to a public key and a private key. These are two secure, cryptographic keys that allow limited interaction with the system. Let’s say two users agree on an exchange of currency like Bitcoin.One user can initiate the transaction with their public and private keys. The other user can use their keys to accept the transaction. Together, they can submit the transaction to the public P2P system.
At this point, a section of the overall system checks the information in the transaction. This is to ensure that it agrees with all other prior information. In other words, if these fact-checking nodes agree that the initiating user doesn’t have the cryptocurrency they claim, then the transaction is denied. If the other nodes agree, then the transaction is accepted and it becomes a new “block” in the chain.
Main Tenets of Security
At this point, you may be wondering why blockchain is hailed as being such a secure system. After all, ledgers are nothing new. And, since these interactions unfold in a digital environment might make them vulnerable.
These perspectives are rational. However, they ignore the most crucial ingredients for blockchain’s security. In fact, it’s reservations like these that are partially responsible for the wide fluctuations in Bitcoin’s price.
Main Blockchain Security Features
Let’s break down the main features that make blockchain technology so secure to illustrate why there may not be any issues with blockchain security:
- Blockchain technology relies on a ledger to keep track of all financial transactions. Ordinarily, this kind of “master” ledger would be a glaring point of vulnerability. If the ledger was compromised, then it could lead to a system breakdown. For example, if someone altered a record, then they could steal a limitless amount of money. Or, if they merely read all the transactions, then they could gain access to sensitive private information. In the blockchain, the ledger is decentralized. This means no single computer or single system has control over the ledger at any one time. It would take an incredibly sophisticated, coordinated attack on thousands of devices, simultaneously, to gain this type of access to the main ledger.
- Another tenet of security is the chain itself. The ledger exists as a long chain of sequential blocks. Each chain represents another piece of the overall puzzle. Structurally, these records date back all the way to the system’s launch. This means anyone who tries to alter a transaction would first have to alter all transactions leading up to that transaction, and do so accurately. This makes the hypothetical tampering process much more complicated. Also, it greatly increases the overall security of the system.
Other Security Features
Plus, there are more security features that help blockchain stay safe:
- It takes more than just two users to agree that a transaction is sound. Even in most modern payment processing systems, there are only a few links in the chain of verification. There is a buyer, seller, and maybe a couple of third parties (bank or credit agency). In the blockchain model, there are hundreds to thousands of distinct nodes. Each node has a complete copy of the digital ledger. These can independently work to verify the transaction. If the nodes don’t agree, then the transaction is canceled. This system keeps the ledger tidy. Additionally, it makes it nearly impossible to commit a fraudulent transaction.
- The cryptographic keys used in blockchain exchanges are also marvels of modern cybersecurity. Each cryptographic sequence is long, complex, and virtually impossible to decipher unless you have the authorization to view it. The two-key system makes transactions even more secure. And it does so without sacrificing the transparency that makes the system so unique.
The Biggest Vulnerabilities
That being said, blockchain isn’t a perfect solution. Like any system, it has points of vulnerability. Therefore, you should be familiar with those points of vulnerability if you plan on investing in cryptocurrency. And, if your business will have any dealings with blockchain in the future, then consider these issues with blockchain security:
The complexity of the technology.
It’s a difficult system to create from scratch (if you’re trying to create a version for your own brand). One small misstep, and your entire system could be compromised. Of course, this isn’t a flaw with the system itself, but rather with its execution. Similarly, the complexity of the technology makes it more difficult for the average person to understand. Therefore, they may not properly understand the risks and function of the system.
THE SIZE OF THE NETWORK.
For blockchain to work, there needs to be at least hundreds — preferably thousands — of nodes working in unison. This makes blockchain systems especially vulnerable to attack and corruption during the early stages of growth. For example, if a single user gets control of just 51 percent of the nodes on a system, then they may be able to fully control its outcomes. On a scale of just 20 nodes, that’s not an impossible feat.
The speed and efficiency of the network.
The design of the blockchain may also compromise its ability to process exchanges at a suitable rate. If a system grows too complex or in-demand before it develops an infrastructure that can support it, it can lead to data storage and transaction speed issues. This can negatively interfere with an otherwise efficient system. This is why it makes the list of issues with blockchain security.
The politics of execution.
Though not a security issue with blockchain directly, the politics of the system could affect its execution and development. The fact that blockchain-based currencies are decentralized and international means that government-controlled currencies could become intrinsically less valuable. Accordingly, some national governments are working to introduce heavier regulations to the blockchain. They hope to control it before it threatens their economy or grows too powerful. As one of the many issues with blockchain security, this could postpone widespread adoption of the technology.
For example, NiceHash, a third-party Bitcoin mining marketplace, was recently hacked, losing more than $60 million of cryptocurrency, because its platform wasn’t secure. This wasn’t a flaw with the blockchain. Instead, cybercriminals gained access to the system by using the blockchain.
Blockchain transactions make use of a public and private cryptographic key.
Those keys are nearly impossible to crack on their own, but a cybercriminal could get ahold of those keys through more conventional, easier means. For example, they could get them if you store the keys on an insecure platform. If someone finds your email password, they’ll have access to your entire inbox. In the same way, if someone finds your blockchain keys, they can impersonate you on the blockchain. This is one of the main issues with blockchain security to ponder.
Users on the blockchain are also vulnerable to other traditional scams. However, these aren’t inherent security weaknesses of the blockchain. For example, if you get an email from someone who convinces you they have a worthwhile investing opportunity, they may trick you into delivering them cryptocurrency without delivering the products or services they promised.
Is Blockchain “Safe”?
In looking at these issues, can you truly consider blockchain technology to be “safe” or “secure?” Or, are there still issues with blockchain security to assess?
The system itself is fairly airtight, so long as it’s been executed properly, and has a decent network of users on the system. However, any system has some vulnerability, and the blockchain is no exception.
The key thing to remember here is the vast majority of blockchain security breaches are related to human error. When properly executed and protected, the blockchain is transparent and tamper-proof. And, that is about as “secure” as a technology can get. In doing so, you’ll be able to leverage the benefits without worrying about issues with blockchain security.
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Author: Peter Daisyme