Experts tout blockchain security — but how safe is blockchain technology? Blockchain secures data because its distributed nature prevents a single point of system failure. Think of blockchain as a digital record book of which all users have a complete copy, and no one can add to it (unless everyone agrees the new transactions are genuine).
But the blockchain does not live in a vacuum. It operates in computer software, which always has its flaws. Before you invest in blockchain, consider these seven hard truths about its security.
Blockchain Is Not Impervious
1. Hackers have already successfully breached the blockchain.
Recently, criminal hackers pulled a “double spend” maneuver. In January, cyberthugs operating as Ethereum Classic miners launched a “51% attack,” gaining control of more than 50% of the blockchain. According to Quartz, they quickly sent and reversed transactions, keeping their currency and purchases, and then spending their cryptocurrency again. Once a hypothetical approach to breaking the blockchain, 51% attacks are becoming more common.
2. You can implement the blockchain incorrectly and create vulnerabilities.
Despite high hopes of stakeholders across industry verticals, many blockchain projects fail, according to PC Magazine. Causes include the lack of funds or knowledge to see projects through, and bad blockchain ideas, such as when a bank tried to put consumers’ information on a public blockchain, according to The Next Web. Missteps from poorly conceived blockchains leave holes where hackers can enter.
3. Blockchain applications are vulnerable to the same issues as other software, such as coding bugs and flaws that let hackers gain a foothold.
A blockchain on its own is no use to anyone — you have to build applications on top of it. Application developers make mistakes, writing errors into the software’s code, thereby opening pathways for criminal hackers to invade the blockchain itself.
4. Weaknesses in a blockchain create vulnerabilities in applications, technologies and services built on top of it.
This hard truth is the converse of the previous one. Blockchain applications depend on the stability of the underlying platform to function properly. When software developers introduce coding errors (bugs) directly into the blockchain, performance lags. Such vulnerabilities in the blockchain can lead to errors in the applications, which criminal hackers can leverage.
5. We have yet to see the blockchain in large-scale applications, which could break it.
Once the history of transactions grows beyond any computer’s capacity to contain it, the blockchain cannot scale to include any more transactions. The blockchain could extend its capacity if the transactions were divided among multiple computers. However, this approach would make the system susceptible to attacks from criminal hackers, giving them control of the computers.
6. Developments in the technological landscape, such as quantum computing, will eventually make hacking the blockchain even easier.
Eventually, quantum computing systems will make calculations 100 million times faster than those of existing systems, reports CNBC. These calculations are fast enough for hackers to discover the keys that unlock blockchain encryption to gain access.
7. Hackers will always find new ways around blockchain security.
It is always easier to break something than to build it. Security pros must close every vulnerability in the blockchain to keep criminal hackers out — an impossible task, since no one can test software for every conceivable way that cybercrooks could misuse it. Unfortunately, hackers will always find new entry points, since they only need one open vulnerability to gain entry.
Blockchain As Security, or Securing the Blockchain?
Securing transactions with blockchain is a distinct goal from safeguarding the blockchain itself. Digital records stored in the blockchain are secure insofar as all participants must concur on any changes before they’re made. But you still need to implement the blockchain properly and protect it.
If you follow blockchain industry developments, watch how other players address the seven hard truths. How do they weigh the opportunity cost of using a blockchain and follow best practices for protecting it? In the end, a blockchain investment could pay dividends for the security and integrity of your transactions.