The blockchain is the most groundbreaking information technology of all time, a revolutionary machine that makes it possible to dispense entirely with trusted third parties like banks and governments. But as we all know, this high-tech machine is susceptible to hacking, fraud, and malware. The security risks for blockchain technologies are so manifold that investing in this space could be potentially over-inflated.
What is Blockchain?
A blockchain is a distributed ledger that records transactions across multiple computers so that individuals cannot change the record retrospectively without affecting all following blocks and requiring network cooperation. This enables participants to check and audit transactions cheaply.
Blockchain technology is decentralized, so no one computer holds the entire blockchain. Each block contains the previous block’s hash and a timestamp – so you cannot alter it without altering all subsequent blocks, and the system knows that you have done so.
According to Blockchain technology, when data is stored on the blockchain, it is immutable. The person holding his information on the blockchain has the right over it. But that doesn’t mean that the data is not vulnerable to cyber-attacks.
Is the Blockchain Industry Safe?
Blockchain technology can provide immense societal benefits. It is a secure method for tracking data and establishing the truth. The immutability and verifiability of blockchain give a complete record of transactions; it also can eliminate many instances of fraud and third-party interference with transactions.
Due to these perceived benefits, there has been a rapid growth in the number of companies offering blockchain-based services and products. However, companies working in this space may be unaware that they potentially expose their business to cyber-attacks.
Understanding the Cybersecurity Risks in Blockchain
Like in any other scenario, the cybersecurity issues that come with blockchain technology can be divided into two primary categories: the software and the hardware risks.
Some experts argue that investors could easily avoid some of these risks thanks to technological advances. Still, there’s no denying that our technology and our smartphones are more secure than they used to be, so the fact remains that cybercriminals will always find a way to exploit technologies like blockchain.
The software risks that come with the use of blockchain are extremely far-fetched but are nonetheless real, and they depend on the diversity of blockchain applications and their modification. For example, a malicious actor could buy mining power and then reverse-engineer the code.
What Are the Cybersecurity Risks in Blockchain?
The distributed nature of Blockchain technology enables many things, but there are inherent security concerns. It is described as an open and distributed ledger where everyone in the network has equal access to see any transaction at any given time. Below are the risks in cybersecurity you need to know about:
Lack of Security
With a decentralized ledger, the inefficiency of a centralized authority can be highly detrimental to the end-user. They will have to trust a third party they don’t know, making them at risk of data theft and fraud. The transparency in this transparent ecosystem makes blockchain vulnerable to any malicious actor within its network.
Insufficient Security Measures
In the blockchain system, all records are managed by multiple nodes or nodes. Hence, there must be strong security measures in place so that no malicious participant can alter or corrupt it. Individual nodes are the record keepers, and they must be secure.
Inability to Trust the Technology
With blockchain technology comes a feeling of trust in its decentralized system. However, data security is often a concern because hackers can easily penetrate the system with simple software programs. For instance, cybercriminals use malware and phishing scams as lightning-fast ways to gain personal information and information systems.
Malicious Intentions
The primary security risk that plagues blockchain is that of malicious intent. Cryptocurrencies such as Bitcoin aren’t backed by any government or organization, which means that for hackers to steal funds from your purses, they don’t have to hack a big corporation – only your account. And since cryptocurrency wallets are pseudonymous, it isn’t hard for them to do so.
Operational Risks
Operational risks pertain to the day-to-day activities undertaken by organizations using blockchain technology, including legal and taxation issues. The hack of the DAO is a classic example of how operational risks can affect blockchain projects.
Some experts opine that this risk could be eliminated or mitigated if there were more clarity on how participating entities should apply taxation and regulation to blockchain technology. However, that’s easier said than done, especially since this technology is inherently irreconcilable with regulation or oversight.
Conclusion
Blockchain technology can be beneficial, but it has its own unique set of risks. It is essential to understand the risks of this technology so you know how to protect yourself and your finances. To keep your cryptocurrency safe, you need also be aware of essential security tips in crypto. After all, blockchain technology cannot provide complete security. Stay on top of the best cybersecurity practices now.
