Technology

Misconceptions About Blockchain Security and Smart Contracts

Blockchain has gone from a fundamental component of Bitcoin to a technological force to be reckoned with. Technology companies, large and small, have begun adopting blockchain and smart contracts as a way to improve and, in some cases, revolutionize their businesses. Even industry giants like IBM, Intel and Microsoft are widely adopting blockchain development.

As with any relatively new technology, however, there are a number of misconceptions about blockchain – especially in the realm of security. Let’s look at a number of these misconceptions and sort out fact vs. fiction.

Myth One: Blockchains Cannot Be Compromised

One of the single biggest selling points of blockchain is its inherent security. Because each block in the chain only has information about the previous one, and all information is encrypted, it is very difficult to compromise a chain. That being said, it is not impossible. If a bad actor were able to gain control of enough of the chain, it would be possible to compromise it. Even if the information’s integrity was not compromised, the hacker could disrupt the chain’s operation by not properly forwarding blocks.

While this is technically possible, the likelihood of it happening is extremely low. The larger and more decentralized the blockchain, the more immune it is to such a so-called “51 percent exploit,” where the perpetrators would have to attain majority control. It would be very difficult for a hacker or group of hackers to gain control of enough of the chain to be able to compromise it and, even then, it would be relatively easy for other members to spot, undermining the value of such an exploit.

One of the single biggest selling points of blockchain is its inherent security. Because each block in the chain only has information about the previous one, and all information is encrypted, it is very difficult to compromise a chain. That being said, it is not impossible. If a bad actor were able to gain control of enough of the chain, it would be possible to compromise it. Even if the information’s integrity was not compromised, the hacker could disrupt the chain’s operation by not properly forwarding blocks.

While this is technically possible, the likelihood of it happening is extremely low. The larger and more decentralized the blockchain, the more immune it is to such a so-called “51 percent exploit,” where the perpetrators would have to attain majority control. It would be very difficult for a hacker or group of hackers to gain control of enough of the chain to be able to compromise it and, even then, it would be relatively easy for other members to spot, undermining the value of such an exploit.

Myth Two: Information Is Public

Another common misconception is that the information contained in a blockchain is publicly available. This is, in large part, because of the fact that a blockchain’s distributed ledger is public. While the ledger itself is public, the transaction details, including associated individual data and smart contract information, are completely private and heavily encrypted.

This is actually one of the features that makes blockchain such a perfect tool for financial institutions and smart contracts. Because there is such a clear distinction between the public ledger and private information, financial transactions using smart contracts can maintain 100 percent integrity while still preserving the privacy of the involved parties.

Myth Three: Blockchain Is Only for Criminals

Because of its emphasis on security, many erroneously believe blockchain is primarily used by criminals. Nothing could be further from the truth. Blockchain is used far more by companies, organizations and law-abiding groups around the world.

In fact, while individual information is protected, blockchain’s ledger actually makes it relatively easy to trace criminal transactions to their source. This means that blockchain is no more, or less, exploitable by criminals than any other technology. Most people use it for law-abiding purposes, while some use it for illegal gain.

Trust the Experts As with any new technology, there is an inevitable learning curve and misconceptions like these are bound to arise. To gain a better understanding of blockchain, including how it can play a role in your business, don’t trust just anyone. Instead, rely on a qualified blockchain developer who has the expertise necessary to navigate these issues.

Surrey604 Staff
Surrey604 is an online magazine and media outlet based in Surrey, BC. Through writing, video, photography, and social media, we secure an intimate reach to the public. We promote local events and causes.
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