Blockchain technology has gained attention in recent years due to its use in cryptocurrency markets. However, that isn’t the only thing blockchain technology is used for. Blockchains are powerful tools for protecting digital information. While blockchain technology is difficult to exploit, it is not invulnerable.
How Blockchain Works
Blockchain technology utilizes decentralized networks instead of stand-alone servers. It relies on a distributed ledger that resides on multiple different independent computers that communicate via various network protocols, such as ipfix. The technology is used to track, coordinate, synchronize and announce transactions. The various nodes in the blockchain organize data into blocks and then chain the blocks together in an append-only mode. The use of this mode prevents alteration or deletion of the blocks already on the blockchain. Using blockchain technology eliminates the need to use a central clearing authority.
Blockchain Security
Blockchain technology can be hacked, but its decentralized nature makes hacking more difficult. To successfully hack a blockchain, hackers need to control more than half of the computers in a distributed ledger. The distributed nature of blockchain makes it possible for public companies to increase security by adding more computers to the chain. More nodes on a chain mean more people checking each other’s transactions and reporting malicious activity.
The Role Miners Play in Blockchain Security
Cryptocurrency miners verify transactions in exchange for coins. To receive payment, miners must submit proof of work documentation that supports or denies each transaction that they verified.
Prevention of Double Spending
Blockchain technology is useful for preventing double-spending attacks for payments and money transfers. A double-spending attack occurs when users spend cryptocurrency more than once. Because cryptocurrency is digital, without protections in place users can send the same coin to two recipients at the same time. The use of blockchain technology makes it possible to verify that any given coin has not already been spent and block multiple transactions on the same coin from occurring.
Blockchain Security Risks
While blockchain technology is generally secure, there are still ways to exploit it. Because users can send or receive money without humans being involved in the transaction, human intervention is removed as a safeguard against fraud. This is one area where utilizing a central clearing authority can be beneficial. The anonymity involved in spending cryptocurrency has made it popular with criminal organizations and may result in future regulations on its use.
Additionally, while the nature of blockchain technology makes it difficult to hack, hackers have found ways to exploit it. Phishing is one way hackers break into networks by sending fraudulent emails that fool users into providing wallet key credentials. Some hackers have managed to gain access to real-time data as it is transferred between internet service providers. Finally, there is the risk that a miner or group of miners could obtain control of more than 50% of a network’s mining power, which would give them control over the ledger.
What To Look for in a Secure Blockchain Network
Users who want to make sure the blockchain network they are using is secure can look for a few specific attributes. First, the network should have auditors who are actively monitoring the system for flaws. Second, the network should offer security options, such as alerts for suspicious transactions, multi-signature transactions and two-factor authentication. Finally, the network should store sensitive information in a secure location without internet connections.
Particularly risk-averse users may want to stick to the oldest and best-known networks because these have been the most tested and developed the best security technology. Newer network admins who have less experience running a network may introduce security flaws that make their networks more vulnerable to attacks.
Blockchain networks are usually safe, particularly when network security best practices are followed. However, they are not completely immune to risk. Users should protect their data by securely storing private keys and being aware of potential phishing scams. Users should also keep an eye on their accounts and report any suspicious activity immediately.
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