How Did The Blockchain Losses Worth Billions Threaten The Technology's Growth?

The Losses Made In The Blockchain Technology

To state the fact blockchain the underlying technology of cryptocurrencies has enormous promise but has also been found to have major vulnerabilities that could lead to billions of dollars in losses by users. Hereby a study by MIT has analyzed 72 cases of publicly reported blockchain system security breaches from 2011 to 2018 totaling $ 1billion and amounting to losses of as much as $ 600 million for some companies.

Thereby according to Stuart Madnick a professor at MIT as well as a founding director of the Cybersecurity at the MIT Sloan research consortium in a column for the Wall Street Journal, the bottom line is that while the blockchain system represents advances in encryption and security as it is vulnerable in some of the same ways as other technology as well as having new vulnerabilities unique to blockchain. 

Why Is Distributed Ledger Technology Far From ‘Unbreakable’

Therefore the addition of blockchain has been fruitful for many companies as some of which have seen their shares skyrocket just by adding the word to its startup name. Therefore proponents of the distributed ledger technology tout its transparency, distributed control, and anonymity as well as improved security. As it is said while the blockchain system is sure to offer certain advances in encryption and security, there remain many issues with technology which is far from unbreakable according to a handful of recent reports.

Subsequently, the recent MIT study looks at the 72 publicly reported security breaches as the Madnick notes that there may have been many more while considering that some cyber-attacks are not publicly reported. Hence the reported breaches over the past eight years cost organizations anywhere from $ 12,000 to hundreds of thousands of dollars in losses. 

Thereby the column lays out blockchain’s downside noting that the blockchain maybe it's own worst enemy as many of the things that make it so great also increases its vulnerability when it comes to security. These three examples include transparency, distributed control, and anonymity.

Eventually, as for transparency, it is given that blockchain ledger and software code is copied on many servers and viewable by many as it leaves room for a bad guy to access it and study it. Therefore the distributed nature of the technology in which there is no on or off switch from a central computer means that it is difficult to stop an intruder from siphoning off more and more money.

It is then observed that additionally, the anonymity offered to blockchain users who receive a blockchain keys comprised of long numbers poses a threat. Thereafter while the number is impossible to guess and therefore has its security benefits in that sense, there is no override capability on your blockchain account and if therefore you lose your key, then the account is lost. It was found that in one case, the CEO of cryptocurrency funds were not retrievable per PCMag.

Regulatory Hurdles, And The Disappointing Bank Test

Subsequently, the news of the security breaches comes as up to 40 startups have applied to the SEC to use blockchain’s licensed brokerages per another Wall Street Journal story. Therefore none of the applications including those from companies hopes to launch electronic trading platforms have been approved since regulators upped enforcement against crypto issuers and reflecting the regulatory hurdles, and burdensome delays that many crypto companies as well as major players like FacebookInc, that are expanding their crypto reach may face.

Hence a report from Germany’s central bank demonstrated that blockchain technology was slower and more expensive in a recent test as outlined in the earlier story.

Looking Ahead

It is observed that while recent reports highlight blockchain’s downside, its champions are confident that the technology will prove itself in the long run thereafter revolutionizing the tech world much like the internet did in the 90s. Hence the crypto bulls have a great deal to celebrate as more institutional investors’ express interest in the sector and the price of digital assets led by Bitcoin more than double.

Hence the technology is banked upon as the future of the banking and Fintech industries. It is important to note that there are still others who are looking forward to making sure the implications and applications of the blockchain technology ensure data security.

While we wind up the discussion here, stay tuned for more from us. As the news about the industry is buzzing make sure you get all the info on the development of the blockchain technology.