Blockchain technology is no longer a weird tech-related acronym. As the world is once again choosing to buy Bitcoin, we see a rise in the popularity of blockchain technology. However, with an increase in attention comes a parallel increase in dangers - among which is hacking.
“Hacking” in the context of blockchain is a very vague term. Hacking a blockchain would require someone to gain control of more than 51% of the network’s computing power in order to control the generation of new blocks. This process is more commonly known as a 51% attack, and we have seen it happen with several cryptocurrencies.
How the Hacking Works ?
Here is how it works - The cybercriminal takes control of the blockchain and attempts to cause a rollback to previous transactions in order to profit from them.
But orchestrating such an attack is not a simple task to accomplish. Hacking a blockchain, especially one of large market participation, like Bitcoin, would require an enormous amount of funds. Aside from that, blockchain is (in theory) unbackable, since they use unique cryptographic information to validate each block using a consensus protocol. By doing so, many different participating computers (also known as nodes) see and validate the same transaction.
There is another hack-related issue when talking about blockchain. The majority of the population links data breaches with the exposure of private information. That is not the actual case when it comes to blockchain, since the information is already publicly out in the open. This lack of privacy is one of the biggest plus points when it comes to blockchain technology as it adds to transparency and democratization, but still maintains a relative level of pseudo-anonymity.
So what can we do in order to maximize the positives of blockchain while making it immune to hacking attempts?
How can we maximize the advantages of blockchain while protecting it from hackers and enabling privacy?
Each blockchain is dependent on a set of rules that are set by design through the network that operates it or other third parties. The governance rules of a blockchain are established by the participating members of the community and are then added to the tech platform. They consist of procedures related to decision-making processes and all sorts of technical rules that guide its operations.
Aside from individual rules, a blockchain is also dependent on third-party rules. These exist and function outside of the blockchain. Rules that refer to this type are not executed automatically but need authorization from a third party to execute and oversee. An example of third-party rules could be linked to laws. To give an example, the current state of GDPR offers individuals the opportunity to be “forgotten” by data-capturing mechanisms. This can cause a conflict with a blockchain’s internal governance rules, which do not support such practices.
Another example related to the governance of the infrastructure is that of encryption. They exist outside of the network’s structure since they are applied in various ways by different developers. Rules related to encryption allow people to connect with the blockchain network but also lead to vulnerability if the levels of encryption are not strong enough.
The use of a network will be limited if those who create it cannot protect its users’ privacy. To address this issue, there are 3 potential solutions.
- Make it possible to remain anonymous. By this, we refer to the process of pseudo-anonymity. Transactions and amounts are shown to the public but the actual sender and receiver are represented by a public address.
- Do not make sensitive transactions on the blockchain. This may cause limitations and go against the vision of blockchain as a transparent system but may become necessary in the early stages of the technology’s development.
- Use cryptography and encryption. By cryptography, we refer to the use of long strings of alphanumeric characters known as public addresses and private keys. The first is a user’s address that remains public and indicates the person participating in a transaction. The second is the code that allows a user to access the blockchain and make those transactions. The main issue with those keys is their sensitivity. They are most commonly kept offline and can thus easily be lost. If you don’t have access to these keys, you lose access to certain information. One way to combat this, as seen with cryptocurrencies, is to keep a backup phrase.
To keep a blockchain protected from hacking attempts, you will need to consider both layers of governance discussed above, both also the implementation of encryption tech. If we had to translate this into a takeaway message it would have to be formed as follows:
Blockchains can’t be hacked in theory, but there are loopholes that cybercriminals could utilize if the proper protective measures are not set in place.