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Blockchain: It’s NOT cryptocurrencies, y’all

The inherent qualities of blockchain; which all manner of crypto coins are leveraging; are also what that is causing a superabundance of activity around these digital money and making them attractive targets for hackers.

Blockchain is a ledger of transactions that is transparent, making it extremely difficult to tamper with.

So, all the high-profile hacks we read about in the news, and most likely the hacks we have not heard of (yet), actually happen on the ‘layers’ above the blockchain.

According to Wayne Ch’ng, Malindo Air’s Head of Technology, “A simple way to explain is the scene in ‘Trading Places’, when everyone was buying and selling orange juice concentrate – how is all that tracked? Who bought and sold how much? Who bought and sold first?’

“Blockchain is the technology that tracks that (who, what, quantity). Mining is the process in which those transactions are sorted.”

A ledger of transactions, indeed. But besides transactions, blockchain can also record ownership and identities. Another reason why blockchain is attractive – it negates the need for a middle-man, and without having to pay these middle-men now, the cost of transactions become lower.

Founder of Digital Assets Group, John D’Agostino, had said during the recent World Capital Markets Symposium in KL, “You can’t be a monopoly when there are decentralised systems who would ask, ‘why do I need you in the middle?’ This would definitely push against existing networks.”

Decentralised = Secure?

So, blockchain is a decentralised network of nodes whereby each node holds a copy of the entire blockchain. By now, you may be thinking the blockchain being a database that is distributed, sounds like a cybersecurity breach just waiting to happen.

This is the global distribution of bitcoin nodes as of early January this year. Another digital currency, Ethereum, has over 25,000 nodes as of May last year, making it the most decentralised digital coin.

But, it is this decentralised nature of the database, as well as its transparency and consensus trust, that makes it extremely tamper-proof.

MDEC Head of Data Cloud and Digital Enablement, Tan Tze Meng, shared, “If you wanted to hack the blockchain, you would have to simultaneously hack at least 51-percent of these nodes.”

That’s at least 5500 nodes (or miners), and to hack all of these at the same time is something which Tan described as, “Not a trivial exercise.”

So, no single party may possess 51-percent of the mining pool, because then it would be possible to falsify an entry (transaction) into the blockchain, and for example allow a spending to happen twice.

Tan explained, “Hacking one node, doesn’t have major consequence. You can compromise the data on that node, but no one else will accept that data.”

So, blockchain is a ledger that is transparent and that self-checks itself, and Tan said, “This is ledger data. Stealing this is worthless. It’s public info and you can browse it, but it’s mostly meaningless. This has been formatted for human viewing.”

Block #503846

Summary

Number Of Transactions              964

Output Total      6,962.99414422 BTC

Estimated Transaction Volume   935.22287253 BTC

Transaction Fees              4.23825351 BTC

Height   503846 (Main Chain)

Timestamp         2018-01-12 09:28:57

Received Time   2018-01-12 09:28:57

Relayed By          ViaBTC

Difficulty             1,931,136,454,487.72

Bits        402690497

Size        1030.925 kB

Weight  3992.939 kWU

Version 0x20000000

Nonce   2194801093

Block Reward     12.5 BTC

As a result, hackers will target more vulnerable points instead, like exchanges or e-wallets, or other assets that are linked to the ledger.

What can we say about preventing hacks that the cybersecurity industry hasn’t said before? Just because cryptocurrencies are on the blockchain, it doesn’t mean that the same rules do not apply.

Uh, no…

Exchanges, e-wallets, keys, and so on, are still susceptible to cyberattacks.

Since 2011, there has been documented reports of exchanges being manipulated. Exchanges are websites where one can buy, sell, or exchange cryptocurrencies for other digital currencies or fiat money.

The most recent hack on an exchange happened last January, when Tokyo-based Coincheck, lost $530 million worth of digital coins. The year before, Mt.GOX, NiceHash, BitFinex, Coinbase, and more, were the other exchanges/mining pools, that were hacked or compromised.

This year 2018, the number of these kinds of hacks and compromises upon exchanges and vulnerable points of the blockchain, are expected to increase.




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