Blockchain: The Pro's and Con's of a Technology that Will Affect our Future
Blockchain is a revolutionary technology that will enhance cybersecurity and change the way businesses make transactions. First introduced in 2008 as the mechanism behind the crypto-currency Bitcoin, blockchain is now recognized as the most influential technology for the future of business. More specifically, for the infrastructure of future business transactions.
"The Internet of Everything needs a Ledger of Everything." — Don and Alex Tapscott
The safety of adopting blockchain technology for businesses lies in the fact that it is a distributed, rather than centralized network. For hackers, this means that in order to break into a data source, they would need to break into all of the computers in the distributed network at the same time. The computing power necessary to conduct such a hack has been compared to the equivalent of the "hashing power of a nation state and all the tech companies therein to overcome the more than 51% computational power of the network" — Collin Thompson.
Many assert that blockchain is not really a disruptive technology, but rather a foundational technology, as it will provide the structure for future transactions involving anything of value.
“It’s the first native digital medium for value, just as the internet was the first native digital medium for information.” — Harvard Business Review.
A Case Study #1: Banking
Current systems of banking are vulnerable to fraud. Recently, a group of hackers took control of all online and ATM operations of a large bank in Brazil for five to six hours. They obtained passwords, credit card, and other private information while those who logged into any of the bank's online portals unknowingly were rerouted to fake replicas of the actual login sites. They stole a whole lot of candy from the proverbial baby…
With blockchain technology, a middle man such as a bank is not necessary. Therefore, the information of value would not have had a centralized point of access (the bank's website), and it would not have been possible for even a group of hackers to obtain so much information from so many people in the space of five to six hours. It was a real case of bears who raided the honeypot.
Case Study #2: Government Corruption and Fraud
They should make a movie out of this one! Government officials were investigating theft, extortion, and other crimes on the Silk Road online, dark net marketplace, and the blockchain ledger uncovered that two federal agents on the task force were, in fact, dun dun dun…. the criminals! The federal agents had attempted to cover up the evidence, but because of the nature of the public, decentralized ledger, they were not able to. Thus, the immutable, un-alterable nature of the blockchain allowed for government fraud to be detected.
Disruptive and Foundational, but not Perfect…
There are a few ways that hackers can break into the blockchain. First, there is the 51% hack. If 51% of the network of miners, or of work done by miners is bribed to alter the ledger, this can result in corruption and incorrectness in the ledger. Second, an Eclipse attack is possible if one of the nodes of the blockchain network is disabled and can no longer communicate with other nodes.
Regarding bitcoins, although the alt-currency is safer to use and insulated against inflation and currency devaluation, there is still the malignant human factor in that many scams exist. Sometimes even experts can get scammed.
Bitcoin has facilitated scammers due to the anonymity of conducting transactions. Here are some common issues:
- Scammers will claim to multiply your coins if you send them to their company… yeah, right!
- It is possible for theft to occur, and unfortunately, customers who had bitcoins stolen were not able to retrieve them. Many are calling for a mechanism in the blockchain that can make reversals in these types of cases.
- Ransomeware is malware that freezes your device until you pay a ransom to the attacker, usually in bitcoin. Don't pay it, though!
Here is a rudimentary table of pro's and con's of blockchain technology:
Because blockchain technology will make so many institutions that serve as intermediaries obsolete, its acceptance may take longer than tech enthusiasts would like. Clearly, there will be immense pushback. To be fair, however, the institutions that currently exist are prone to human error, fraud, and corruption, opening the door for newer and safer ways of conducting transactions.
From banking to insurance, we are sure to witness drastic change as industries begin to adopt widespread use of blockchain technology. Although ubiquitous use of blockchain is expected to take several years, it is imperative that businesses that wish to stay competitive begin planning now for its adoption in order to stay at the cutting (or bleeding) edge.
Suggested reading: Author Collin Thompson wrote a fantastic article that explained the basics of Blockchain for everyday people (like me)!
Bitfinex hack shows how bitcoin's blockchain can be a liability. (2016). Joseph Adinolfi, Market Watch.
Hacker lexicon: A guide to ransomware, the scary hack that's on the rise. (2015) Kim Zetter, Wired Magazine.
How hackers hijacked a bank's entire online operation. (2017). Andy Greenburg, Wired Magazine.
How the US government is using blockchain to fight fraud. (2016). Kathryn Haun, TEDxSanFrancisco.
I almost got scammed by the alleged coindesk. (2014). Ofir Beigel, 99Bitcoins.
The impact of the blockchain goes beyond financial services (2017). Don Tapscott and Alex Tapscott, Harvard Business Review.
The truth about blockchain (2017). Harvard Business Review.