The Good, the Bad, and the Ugly of Blockchain Security
Many tout blockchain technology as the answer to a variety of security challenges. Its decentralized structure has spawned countless security-centric uses such as eVoting, digital identification and contract management.
But why is a decentralized network more secure than a centralized one?
Traditional networks use a centralized authority structure. This authority maintains the validity of the entire system – it creates trust. We interact with these types of networks in our everyday lives at banks, schools and government agencies. Each of these entities store our information on their own central server and each server operates with sole authority.
In contrast, a decentralized network lacks a central authority. Instead, each computer on the network is involved in the verification process – trust is essentially non-existent. All computers on the network abide by a consensus protocol that verifies transactions. This protocol requires that every transaction is agreed to by all participants; if not, it’s rejected.
A decentralized network also distributes data differently. Rather than using a central point of access, all computers on the network hold a copy of the same information. Every user is notified when a successful, verified transaction takes place.
But perhaps the most notable security feature of blockchain technology is its permanence. Once a transaction registers to the blockchain, it’s unchangeable. All of these features suggest that blockchain technology is an improvement to traditional networks.
The Good: Preventing DDoS Attacks
One of the most apparent benefits of a decentralized network is its inherent resistance to DDoS (Distributed Denial of Service) attacks.
But what is a DDoS Attack?
A DDoS attack is a digital assault on a single target. First, a hacker infects hundreds or even thousands of computers with malware. This malware gives the hacker control of each device – unbeknownst to the owner. The hacker instructs each infected machine to send multiple service requests to a specific website or database simultaneously. This causes the recipient to become overwhelmed and therefore unable to respond to the numerous requests that were sent by the infected devices. Ultimately, this is what causes a crash and a denial of service (DoS).
So how does a decentralized network prevent this?
As mentioned, a decentralized network is a system of computers that hold a copy of the same information. The underlying principle here is that each node is involved in maintaining the network’s security; this means that each has an equal opportunity to verify incoming transactions.
The benefit decentralization offers is that the network can continue to operate even while one or more machines are experiencing a DoS attack. This is because all non-affected machines remain active and fully functional. The beauty of a decentralized network is that it’s nearly impossible to simultaneously attack all computers on it precisely because of its decentralized nature!
The Bad: Potential 51% (Majority) Attack
Although blockchain networks are particularly good at resisting DDoS attacks, it’s important to remember that no technology is 100% secure. There’s always a chance that a savvy cybercriminal will target and infiltrate a vulnerability.
One such vulnerability is known as a majority or 51% attack. For example, if one user or group of users on the bitcoin network begin working together to pool hash power, they could take control of the blockchain. Although a majority attack hasn’t occurred on the bitcoin blockchain yet, it has happened on other lesser known networks. These attacks typically result in a loss of confidence in the affected network, significant financial damage and a long repair process.
The Ugly: Successful Blockchain Hacks
Majority attacks are becoming more frequent as the ability to rent hash power gets cheaper.
So, it’s no surprise that they’re happening on smaller networks where it’s easier to become the majority holder of hash power.
Some of the most famous majority attacks include:
- Monacoin: suffered an attack that caused $90,000 in damage
- Bitcoin Gold: 76 false transactions were conducted during the attack – amounting to a loss of $18 million
- Zencash: 21,000 Zen (the Zencash token) worth $500,000 were stolen through three successful attacks
- Verge: $250,000 Verge tokens were stolen
- Litecoin Cash: an attacker gained majority control of the network, but losses were limited as the company alerted exchanges
Embracing the Good, the Bad, and the Ugly
The possibility of majority attacks will continue to increase as hash power becomes more affordable to rent. This of course can lead to an increase in successful hacks. However, the security challenges associated with blockchain technology are solvable.
Through the use of more complex consensus protocols, threats can be better managed and even eliminated. As blockchain technology continues to mature, new solutions will emerge to eliminate vulnerabilities. As a result, overtime, blockchain users and crypto investors will achieve greater security and protection of their assets. So, if you decide to use a decentralized network like bitcoin; now you know the good, the bad and the ugly.
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Jordon Ahosaari cuts through the noise to bring blockchain to a broader audience.