Cryptocurrency has been around for a few years and now, even as we speak, more and more new cryptocurrencies enter the market.
Cryptocurrencies are based on the recently groundbreaking blockchain technology. And the effects of blockchain in our daily life are actually very obvious nowaday.
But what exactly is this blockchain technology? It is safe to use this?
In this article, we will see what exactly are the blockchain security issues that are frequently debated and how it will affect the overall technology.
Introduction to blockchain
Image via 101 Blockchains
A blockchain is, in the simplest of terms, a time-stamped series of immutable record of data that is managed by a cluster of computers not owned by any single entity. Each of these blocks of data (i.e. block) are secured and bound to each other using cryptographic principles (i.e. chain). (Source: Blockgeeks)
The origin of blockchain is actually unclear. Credited to an anonymous person/group by the name of Satoshi Nakamoto, Bitcoin. The suspicious origin of blockchain has become a ground for scepticism and doubt to appear in regards to the blockchain technology and cryptocurrency itself.
A blockchain is, in the simplest of terms, a time-stamped series of immutable record of data that is managed by cluster of computers not owned by any single entity. Each of these blocks of data (i.e. block) are secured and bound to each other using cryptographic principles (i.e. chain).
So, what is so special about it and why are we saying that it has industry disrupting capabilities?
The blockchain network has no central authority — it is the very definition of a democratized system. Since it is a shared and immutable ledger, the information in it is open for anyone and everyone to see. Hence, anything that is built on the blockchain is by its very nature transparent and everyone involved is accountable for their actions.
As blockchain is the foundation of cryptocurrencies, the theft of cryptocurrencies can be contributed to the failure of the technology itself.
There are a few instances where coins and tokens were stolen not in small, but huge quantities. For example, recently, more than US $500 worth of cryptocurrency has been stolen.
Their modus operandi was mainly using a new hacking technique by switching SIM card identities.
This is a shockingly very simple technique where the victims’ phones are controlled by the hacker by connecting the number to the new SIM card.
In order to successfully carry out a SIM swapping scam (also known as SIM porting, or SIM hijacking), a person has to know their target’s phone number. Next, they must contact the target’s wireless carrier to redirect that number to a SIM card belonging to the swapper.
The swapper is then able to impersonate the victim by calling and texting from the victim’s number, which also gives the swapper power to reset the victim’s passwords. This can be especially concerning when it comes to two-factor authentication, a commonly used security measure for safeguarding crypto wallets and, well, all kinds of things.
51 per cent attacks
Probably the most popular kind of blockchain security concerns. Even the Satoshi Nakomoto acknowledged this in blockchain’s whitepaper.
A 51 percent attack occurs when a hacker (or group of hackers) produces more than 50 percent of a blockchain’s computing power. In doing so, they become the network majority and can assume control of the entire blockchain, allowing the hacker(s) to double-spend coins, prevent other miners from creating blocks, and preventing transactions altogether.
The risk level is greater for smaller blockchains with fewer miners since the amount of computing power needed to control 51 percent is lower.
Earlier this year, Coinbase, a cryptocurrency exchange, has suspended trading of the distributed ledger technology platform Ethereum Classic after it reportedly suffered a “51 percent attack” to gain control of a majority of the platform’s network.
The attack highlights the potential vulnerabilities of cryptocurrencies and distributed ledger technology, as assailants can alter the ledger and insert false transactions after seizing 51 percent of the control of the blockchain.
As blockchain is a P2P platform, all transactions that utilised this technology will be visible. If the blockchain is public, all the transactions happened inside is accessible to the public.
Although blockchain is considered as a prime technology, neither companies or individuals are particularly keen on publishing all of their information onto a public database that can be arbitrarily read without any restrictions by one’s own government, foreign governments, family members, coworkers and business competitors.
Blockchain is an effective technology that can be utilised into various extent but the implementation needs to consider the safety issues. If done correctly, blockchain can be taken to a new level that can inspire more secure and effective technology.