Is blockchain only for cryptocurrencies? What are the risks of blockchain?

Summary

  • Cryptocurrency Bitcoin was the first to utilise blockchain technology in 2008 when its anonymous creator, Satoshi Nakamoto, decided he wanted to create a peer-to-peer digital technology, bypassing a financial middleman.
  • The “block” refers to a collection of information or records. The “chain” refers to the way these separate collections of information are cryptographically linked together.
  • Although blockchain technology has emerged through cryptocurrency, the technology can be applied to any system of information which requires cooperation through a network of users.
  • As strong as blockchain’s security seems to be on paper, that is not to say it is not without risks.

Sometimes words have a way of existing on the periphery of the public’s psyche before making it into the public’s lexicon. For example, the word “GIF” (Graphic Interchange Format) – referring to a type of computer file containing a moving image - was added to the Oxford Dictionary in 2012, beating out “YOLO” for the Oxford Dictionary’s American Word of the Year.

The word GIF is now part of the public’s daily lexicon, although debate on whether it is pronounced with a “g” sound or “j” sound is still debatable.

In fact, many of the words that sneak their way into daily usage are (for obvious reasons) tech-related words.

One such word that has been heating up in the embers of daily conversation, and has caught fire in 2021, is the word: blockchain.

Granted, the word blockchain has ridden in on the coattails of the word cryptocurrency, as cryptocurrency’s popularity has soared in the last couple of years in particular. Indeed, whenever cryptocurrency is mentioned, blockchain is almost always around the corner.

Although this is the case, blockchain can be applied to systems outside of cryptocurrency.

Moreover, although blockchain technology seems impervious to any security breaches (at least on paper), that does not mean it is necessarily immune to outside attacks.

Let us discuss.

The emergence of blockchain

Blockchain is not just associated with cryptocurrency. Although, cryptocurrency Bitcoin was the first to utilise the technology back in 2008 when Bitcoin’s anonymous creator, Satoshi Nakamoto, decided he wanted to create a peer-to-peer digital technology, which bypassed the use of a financial middleman (i.e a banking institution), as is the case in the traditional way of commerce.

The first example of blockchain technology was a software created by Nakamoto, called Bitcoin (same as the crypto but with an uppercase “B”).

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GOOD READ: Don’t get blocked out: Investing in blockchain technology

So, what is blockchain?

Despite its ever-present use in crypto, blockchain is a technology that organises any information so that it cannot be hacked or tampered with.

The “block” refers to a collection of information or records. The “chain” refers to the way these separate collections of information are cryptographically linked together.

Source: Copyright © 2020 Kalkine Media

Remember, this technology aims to uphold the integrity of the system and prevent hacking or tampering. Therefore, each block of information on the change must be generated in a way it cannot be changed in the present or retroactively.

In crypto, this information equates to each transaction made on the network. So, if one person buys cryptocurrency from another, that transaction is bundled together and recorded on its own block.

To ensure there is no tampering – for example, double-spending of crypto – the blockchain utilises a node. The node’s function is to uphold the integrity of the transaction by communicating with other nodes on the blockchain.

This means that if just one of the blocks in the chain is tampered with, it becomes immediately apparent to the entire network. To corrupt the whole network, a hacker would have to change every single block on the chain. As cryptocurrency networks become larger and more blocks are added to the chain, the strength of the chain’s security becomes stronger.

RELATED: What is blockchain technology? Why is there an unbelievable hype?

Other uses for blockchain besides crypto

Although blockchain technology has emerged through cryptocurrency, it can be applied to any system of information which requires cooperation through a network of users.

Preventing voter fraud

Voting in democratic nations such as the US is still somewhat archaic. A voter must show up to a physical location, take a piece of paper, vote for their preferences by writing on that piece of paper and then put it into a big box for them to get physically counted up.

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In 2013, Estonia utilised a software to create an electronic system of voting. However, research into this system found that although there were a number of security safeguards, overall, the system was not impervious to all online hacks.

Theoretically, this is where blockchain technology could come in and fix that problem. By utilising blockchain technology in voting systems, security is already assured. Like with cryptocurrency blockchains, any attempt from hackers to change any information within the block of data would alert the whole system.

MUST WATCH: Expert Talk With Mr. Tim Goggin, CEO of Horizon State - Blockchain Digital Voting Platform

Medical records

Medical records contain sensitive, personal, and therefore valuable data, and like any valuable data, they are also open to a cyber-attack.

The years of heavy regulation surrounding the handling of this particular data has hindered technological development, which could see the entire security of such networks be profoundly improved.

Again, blockchain technology can solve these problems. Systems such as MedRec, developed by MIT, creates a decentralised content management system to help the needs of patients, practitioners, and administrators. Due to the nature of blockchain technology, the security of the information held in the system is kept secure because if one piece of data is tampered with, the whole network is alerted.

ALSO READ: Electronic Medical Records (EMR): What are they, and why do we need them?

What are the risks of blockchain?

As strong as blockchain’s security seems to be on paper, that is not to say it is not without risks.

Firstly, there’s endpoint vulnerabilities. These are weaknesses in the system, such as an open PC or mobile phone that has access to the blockchain If a hacker can access these open points, they can potentially access the keys to the blockchain and, once in, can potentially cause significant damage to the network.

Then there is something called a distributed denial-of-service attack. This attack aims to give access to the network by intentionally overloading it with useless information, thereby causing the blockchain’s sever to max out its processing power and causing transactions to lose connectivity to the blockchain.

The final risk posed comes in the banking industry, specifically. In this case, data breaches can be caused by banks using third party blockchain vendors, which do not have the required security. Although this sounds worrying, this particular risk would be attributed to inadequate administration or human error rather than an innate issue with the blockchain network.

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