The strength of blockchain lies in its ability to eliminate intermediaries and allow peer-to-peer transactions, but how secure is blockchain technology? It has been lauded for enabling secure transactions where all records are stored in a public ledger that cannot be tampered with except where more than half the participants agree to do so. Blockchain use cases are increasing by the day as private and public organisations seek to capitalize on the efficiency that comes with this new technology.
The Distributed Nature of a Blockchain Database Makes it Secure
The distributed nature of a blockchain database increases data security because cybercriminals usually target centralized data management points. Each of the nodes on a blockchain network has an exact local copy of every transaction in the database. Since the nodes may be located in different places across the world, it is almost impossible to interfere with the security of the data on the blockchain database. Even if one of the many computers is hacked or physically destroyed, the rest of the database would still remain intact. The technology can improve security in the following sectors:
Identity Authentication in the Banking Sector
Blockchain technology can allow authentication of people and devices without passwords. Verification could be by consensus on the distributed database by use of blockchain based SSL certificates. This would enable banks to go beyond asymmetric encryption.
Internal Communications Security
Internal communication is prone to cyber espionage and data leaks. The use of end-to-end encryption has not solved the problem because it does not cover metadata. Blockchain technology can solve this problem because the metadata used is scattered in the distributed ledger. Consequently, it cannot be collected at a centralized point.
Digital Chats Security
With the apps such as WeChat, Facebook messenger and WhatsApp, messenger services account for a large percentage of internet usage. A large number of people using these services increases data security vulnerabilities. The use of blockchain technology can ensure that communication metadata is scattered across the distributed ledger minimizing the risk of surveillance. There is also increased privacy as users are not required to link the messenger to their email addresses or telephone numbers.
Can a Blockchain Database be compromised?
If more than half the people controlling the database connive, they would interfere with its integrity. This is what Satoshi Nakamoto referred to as “51% attack” in his white paper. Additionally, the repeated hacking of virtual currencies makes the question “how secure is blockchain technology?” very relevant. Millions of dollars have been stolen whenever virtual currencies are hacked. Below are some instances:
- $200,000 was stolen in 2012 when Linode web hosting was hacked;
- $6 million was stolen in 2013 when PicoStocks exchange was hacked;
- $700 million was stolen in 2014 when Mt.gox exchange got hacked;
- $5 million was stolen in 2015 when Bitstamp exchange got hacked; and
- $65 million was stolen in 2016 when Bitfinex exchange was hacked.
These are just examples and not the only hacks in these years. However, blockchain technology still remains more secure than current systems. With time, the existing loopholes may be eliminated.