Blockchain once claimed to be the world’s most advanced and secure technology of its time. The blockchain can be used in various ways and contain a variety of information. However, many fear it’s not living up to its hype or expectations.
To know the blockchain is to understand the blockchain, so let’s start there.
A blockchain is a cryptographic database maintained by a network of computers (centralized or decentralized), each of which stores a copy of the latest version. A protocol is a set of rules that dictate how the computers in the network (known as nodes) should verify new transactions and add them to the database. Take Proof-of-Work or Proof-of-Stake for example. When everything is set up correctly, it makes it extremely arduous to falsify transactions, yet easy to verify valid ones.
This technology has been implemented and praised across all sectors alike for its efficiency and sense of security. Some companies require more complex blockchain enabled systems such as cryptocurrencies. Dealing with “monies” is much more delicate and provides what many hackers want, your money. In some instances, developers may improperly input a line of code causing a “bug”. Most exchanges such as Binance or Coinbase perform routine “updates” or pay “white hat hackers” to attempt “ breaking through” the blockchain in order to manipulate it for self-benefit. These methods prevent actual hackers from taking control of the marketplace and stealing/ rerouting transactions.
However, not every exchange or blockchain operated system catches or even notices these flaws. Even when they do, it’s too late. Hundreds of startups and exchanges such as; Bitfinex, Mt Gox, and Bitstamp just to name of few, have lost hundreds of thousands of BTC and other currencies. User data and wallet information is also at risk. Still, one of the most recent trends on smaller altcoins and even some more popularly known, à la ethereum classic, have suffered from the 51% attack. This method includes having 51% (the majority) of a networks mining power in order to defraud users by sending their payments on an alternative version of the blockchain ( a fork) in which payments never happened.
This method is popular among low performing coins because of the cost of all that mining power. In order to successfully do that to a major coin like Bitcoin, it would cost approximately $260,000 per hour.
In this scenario, a 51% attack has to do more with the volume of a coin rather than a flaw in the blockchain. However, exchanges are still responsible for choosing what coins to host on an exchange in order to protect their consumers. Therefore, it is their job to make sure coins are reliable and have enough volume/ sustainability from cryptonians ( that’s you!) in order to prevent these attacks from happening.
You think 51% is bad? Get a load of this! Smart contract bugs! Crazy right.
Essentially, a smart contract is a self-executing computer program that runs in the blockchain. Now, what the big deal you may say. Smart contracts are typically live or in “ real time”. So if there’s a bug in a smart contract like one that can make payments in real time, the bug may cause the system to not register a transaction going through causing it to pay out over and over again. Smart contracts can also be used to carry out voting. Imagen a bug that allowed for a vote to be switched over to another candidate or not tracked at all.
With a “smart contract bug,” it’s not an easy fix, can’t be patched. Developers may, however, make an “upgrade” by deploying other smart contracts or using a killswitch. But, those who have been hacked will be out of luck.
There are a number of methods a hacker can employ to disrupt the blockchain, one thing I cannot do is erase what is already written.
Truth be told blockchain is still in its early and even developmental stages. No one truly knows the full capacity and efficiency of the blockchain. The blockchain is a wonderful thing yet like all technologies, it’s something that needs to be worked on and perfected. Also regarding technologies, someone will try to “break” it in order to self-benefit. As long as the blockchain is appropriately monitored for bugs and continues to stay up-to-date with there protocols and smart contracts, hacking will be prevented.
Many blockchain enthusiasts say that blockchain will be the safest technology, especially when it can be used with quantum computing. But until that day comes the unhackable can still be hacked. Don’t be afraid to use cold storage in order to protect your assets. As of right now it’s the best way to keep your money where you can see it.