If you are keen to invest in Bitcoins you will want to know whether the blockchain is indeed as secure as it is touted to be. Nothing is completely secure but the blockchain had been designed to be tamper-proof and immutable. This is made possible through three key elements, cryptography, decentralization, and consensus. The interplay of these factors secures the blockchain and prevents counterfeiting and frauds.
Why we can think of the blockchain as being secure:
- Blockchain will distribute the exact same data to all users in the network; so, every time you make any change to one of the computers in the network, the remainder has to validate it and post validation from the miners, the transaction gets added as a new block to the ledger called the blockchain. This means that there is no one point of failure. Unless changes made in one block are reflected in all the other computers, new blocks cannot be mined. This feature guard against fraudulent behavior and double-spending.
- Decentralization forms the backbone of the blockchain and cryptography ensures that attacks are deflected. Data on a blockchain is cryptographically protected or disguised so that the true identity remains hidden. Every block is given a unique hash and if the hash of anyone block gets altered, every block will also have to change. Hashing makes reverse engineering impossible; so fraudsters cannot tamper with data. You can try out the immediate edge software which provides you information security and increased profitability.
- The consensus is the blockchain’s brain and decides which blocks are to be added. Nodes will validate a block that satisfies rules for entering the Bitcoin blockchain by solving complex cryptographic puzzles. At least 51% of the blockchain network must agree on a solution after which a block will get added. This consensus is proof of work and ensures that every block passes through a complicated mathematical process before it can become a part of the blockchain.
In this way, the blockchain allows people to share data securely in a tamper-proof manner. Data storage is through sophisticated rules and attackers cannot typically manipulate these. At the same time, there have been instances where the security of the blockchain has come under the scanner.
- The only way to challenge the consensus is the 51% attack that would require a huge amount of computing energy to be successful. Although these attacks have not hitherto taken place, there have been instances like when GHash.IO went past 50% in 2014 but then reduced the power to preserve the network integrity.
- Another pressing problem lies in how the blockchain is seen to interact with other things. While smart contracts can automate blockchain tasks, they will be effective only if there are written properly. Else, hackers can easily infiltrate contracts and steal money. Even exchanges, where crypto assets are bought and sold, have been vulnerable to hacks leading to colossal losses.
- The blockchain is an evolving technology and is likely to become better every day. While most of the vulnerabilities have been addressed promptly, at times, these have led to hard forks.
- An eclipse attack can be a big threat; this happens when computers in the blockchain are tricked into accepting false data when an attacker successfully takes control of one of the network computers.
- Hackers have successfully infiltrated “hot wallets” or online apps for storing private keys. Even wallets owned by crypto exchanges have been hacked repeatedly. While many leading exchanges claimed that they stored their clients’ funds in cold wallets, a $500 million heist from Coincheck proves otherwise.