With technology advances a-plenty – what’s going to be the next revolutionary technological development?
Big data? The Internet of Things (IoT)? Nope.
It’s going to be the blockchain
With more than 25 countries investing in the technology, and $1.3 billion invested – it looks like individuals, companies, and governments alike are putting their eggs in the blockchain basket.
The public blockchain is, simply put, a digital ledger where digital transactions are recorded publicly. Most widely-known for its use with cryptocurrencies like the Bitcoin, blockchain technology has enabled peer-to-peer transactions to be conducted without a banking system middle man, thereby challenging the power of banks to control currency. However, the applications of blockchain go far beyond cryptocurrency transactions to include supporting all kinds of informational exchange.
The idea of the blockchain is revolutionary because it allows for transparency and a new way of organizing the millions of transactions that society now handles on a daily basis. Its workings are defined perfectly by its name: transactions are recorded in “blocks” and placed chronologically in “chains.” Once a block is complete of transactions, a new block is added on and chained. Therefore, when the chain gets longer and longer, it becomes nearly impossible for hackers to penetrate it for scams, defacement, or theft. With security at maximum – what is there to worry about?
But let’s cut to the chase. Is blockchain technology secure? The short answer is, yes — yes it is.
The long answer is: Maybe. It depends on your perspective.
Time is (not) of the essence
First, there are many who complain about issues in terms of transaction verification. Because the blockchain is a distributed ledger, every block of transactions must compete to be added to the chain. This is done through a consensus process of selecting blocks contributed by miners who solve complex mathematical equations in the fastest time to receive a reward. This process can be sped up by paying an added fee, bumping up the transaction, but the average wait can be upwards of 40 minutes. In rare cases, it may take days for a transaction to be verified. Just so you can see how slow that time is: MasterCard’s 2012 report claimed that its network could take upwards to 160 million transactions every hour, with average response time of 130 milliseconds per transaction.
The duration of the wait is not only a cumbersome issue in terms of service, it’s also a security issue – a lot can happen in 40 minutes, and most people aren’t interested in being patient in exchange for reassurance in security.
Where are my keys?
When people talk about the blockchain, you’ll also hear the word “bitcoin” quite often – but don’t interchange these two terms, as they’re two very different ideas. The blockchain is a decentralized ledger, a database of transactions. Bitcoin is a form of virtual currency, or the preferred terminology “cryptocurrency” (encrypted currency). Bitcoin or ether, another cryptocurrency, are used in transactions that are noted on the blockchain. The currency is stored in a virtual “wallet” that will store and manage these currencies.
To make transactions, private keys (which many store in virtual wallets) are a necessity. Now, private keys are a completely separate entity from the blockchain, making security a bit more difficult to ensure. Despite the myriad of “must-do, top security tips” articles out there, many are still foolish in the way they store or remember their private keys. By choosing to save their keys in an unsafe digital or physical location, it no longer matters how secure the blockchain itself is – breach is still possible with a legitimate, albeit stolen, private key.
On top of possible theft, there’s the issue of the loss of a private key. Just like one may be able to lose a physical car key, private keys can also be lost. The loss isn’t a failure of the blockchain technology, but a result of the user’s misaction. This is a huge area of concern within the public blockchain, as some put the value of lost bitcoins at over $948 million.
Old habits don’t die hard
The reality of blockchain is that in order to truly deliver on the “revolution” in terms of economy, the traditional structures of government, financial institutions, and societal ideas of transactions will have to change.The most hyped up “security issue” with the blockchain technology was in 2016, when the Decentralised Autonomous Organisation (the DAO), an investment fund relying on the Ethereum platform, had 3.6 million “ether” (a cryptocurrency unit of the ethereum blockchain) stolen from them by a hacker who exploited a vulnerability in their system. With multiple heists, the DAO ended up losing around $150 million.
Now, did this mean that the blockchain technology isn’t secure? Not necessarily – the technology itself was and is secure, and strong cryptography is used to make sure that assets are transferred safely. Units of ether are also traceable, meaning that even if the hacker were to try to re-sell his goods, it would be flagged right away. Within the DAO, payouts also take a few weeks – which gave the DAO developers a bit more time to figure out how to remedy the hack. The damage was, however, done in terms of the credibility of the blockchain and the DAO. Ethereum enthusiasts were not fans of the incident, and it caused many to raise their eyebrows at the idea of a public ledger.
The future of the blockchain
So we can see that the “issues” deal more with the applications rather than the technology itself. But the reality is that resolving the security issues, albeit secondary from the actual technology of the blockchain, takes time and effort as public blockchains need acceptance by the community that is utilizing it in order to have any value within the social construct. Will the blockchain technology still catch on? Not only will it catch on, it’s already taking the world by storm. With the gargantuan amounts of money (both physical and virtual) being invested, this isn’t a hype that looks short lived. It still helps to keep in mind that no matter how secure a technology is, the applications surrounding the technology may still need quality security.