April 18th, 2018
It is difficult to read a tech blog or turn on the television without getting news about Bitcoin or Blockchain. One of the main reasons why Bitcoin is so popular is its 2,000% increase in price in just the last few years. It was Bitcoin’s popularity that made blockchain technology so popular and now it is considered to be one of the best innovations of its time.
Blockchain technology is believed to impact businesses around the world. In early 2017, a popular review suggested that blockchain technology has the potential to create new fundamentals for social and economic systems. What’s even more interesting is a recent World Economic Forum’s report, stated that it predicted that by the year 2025 almost 10% of global GDP will be stored on blockchain related technologies.
Blockchain technology is a new concept that is known for its improved security and features. The next question that seems to be on everyone’s mind is, can the blockchain be hacked? This is an important question that can help this new technology to rule the market. There were a few recent attacks on blockchain technology-based tools which led to commentators claiming that no system is flawless and anything can be hacked. But it is important to consider that the success of attackers has nothing to do with the risks involved with blockchain technology, itself. The problem here is poor implementation of any particular organization and for that, you can’t blame the whole technology system. It would be unfair to point out blockchain technology weaknesses because of external developers.
Recently, the Bitfinex case was a clear example of poor implementation of blockchain based technology.. It was the particular exchange’s specific encryption strategy which failed leading to the attack. It should be clear that this attack did not reveal any weakness in the blockchain technology system, as it had to do with the storage of private keys.
There are numerous instances where attacks on blockchain technology have resulted from various other vulnerabilities and not on the blockchain protocol. In general, it is next to impossible to hack blockchain technology, but here are some possible ways in which the system could potentially be compromised:
Every participant in the blockchain network is issued a private key that is used to sign for transactions to and from your account. On signing into the account, other people in the network verify the transaction using individual public keys.
In some networks like Bitcoin, if over half the participants approve any transaction it is considered to be authentic. This creates a few challenges. If half the participants agree to a fraudulent transaction, for instance, it will go through a genuine process. Similarly, if any participant hacks into the system of other participants and diverts over half of network’s computing power to his or her machine, fraudulent transactions can be easily approved.
In some situations, there may be errors in the software that could lead to a blockchain technology security compromise. Such errors may occur during the developmental stage of the implementation of the software, but remember it has nothing to do with blockchain technology, itself.
This new technology system was originally designed to be impossible to hack, but all blockchain systems could potentially have weak points just like any other system.