Blockchain technology has become synonymous with privacy and security, but those features have been put to the test in the last decade. With historical roots focused on cryptography, many blockchain and crypto-currency projects aim to offer unbridled security and privacy measures. The industry is divided between public blockchain platforms such as Bitcoin and private or centralized permissive blockchains focused on business use.
Cointelegraph has previously explored the pros and cons of privacy concerns around blockchain technology, but the security of these systems is an important consideration in itself. In the years since Bitcoin (BTC) began, a multitude of crypto currencies have been created, along with numerous blockchain projects in the private and public spheres.
The large number of working parties and participants within the industry means that vulnerabilities have been identified and exploited over the years. This is despite the best efforts of those involved to create the most secure blockchains, crypto currencies and exchanges.
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This article will highlight public blockchains and crypto-currencies such as Bitcoin, the centralized permissive blockchains that provide business solutions to major corporate companies, as well as privacy coins to further explore the various considerations of their observed and actual security levels.
Is Bitcoin safe for the average user?
Since the use of crypto-currencies began primarily with individual users, and since the adoption by larger entities, such as financial institutions, has been slow, one of the main concerns is the security of the blockchains or crypto-currencies that are being used by individuals. In order to understand what makes these systems secure, Cointelegraph contacted the blockchain and crypto analysis firm, CipherTrace.
John Jefferies, who is the company’s senior financial analyst, identified and separated the different categories needed to fully understand the level of security of an open blockchain or crypto-currency such as Bitcoin:
„There are three levels of security to consider: personnel, platform and technology. Blockchains provide the technology layer, but the average user must have confidence in the security of the particular wallet or exchange they are using. A well-consolidated, open-source blockchain, built with known and reliable encryption, such as the Bitcoin blockchain, provides the level of security to assure the average user that their transaction data has not been altered.
When asked if open blockchain systems have provided trusted security and privacy to users, Jefferies highlighted two key elements of the Bitcoin system that responded to the most common problems plaguing previous digital coin projects. First, the Blockchain technology proved to be a major breakthrough, solving the problem of double spending on peer-to-peer transactions.
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Another vital protocol that ensured security was the basis of Bitcoin’s consensus protocol. As Jefferies explained, blockchain technology also addresses the problem of Byzantine generals, where a messenger who shares information between generals can deliver false information. However, if all parties receive information verified by the majority, bad messengers will be discovered. While these two elements provide solid security for Bitcoin’s overall system, Jefferies makes a clear distinction between the security of the protocol and the privacy offered to users:
„It’s a common misconception that blockchain in transport alliance, the recent news, users lock up ram, an ‘active’ debate, shared a report, bittorrent token, btt, payments, pwc blockchain hedge fund report, the casper upgrade, an arduous process, walmart and sam’s club was designed to be anonymous, but in reality, the Bitcoin blockchain is pseudonymous, meaning that transactions are publicly visible but the individual users associated with the transactions are not. Satoshi’s white paper only talks about privacy in two paragraphs. If privacy was the goal, it would have been designed differently.
Cointelegraph also contacted Stanford University Ph.D. student Florian Tramèr, who recently managed to discover vulnerabilities in the Monero (XMR) and Zcash (ZEC) privacy coins.