IN NETWORK NODES WE TRUST

Blockchain technology isn’t infallible to external interference – Gloria Spittel

Fanfare surrounding blockchain technology stems from its perceived unalterable methodology for record keeping, thereby ensuring the security of uncensored data and increased transparency because of its distributed nature.

But is the technology really that secure?

Apparently not.

A blockchain is a distributed digital ledger amongst trusted nodes over a network. A ‘block’ with a timestamp is added to the distributed ledger, which synchronises automatically when updates are made – such as transactions, for example.

There are two types of blockchain networks – viz. ‘permissioned’ and ‘permissionless’ – which provide differing levels of security and access. Permissioned blockchains require prior approval (similar to possessing an encryption key) and are usually semi-private or private, while permissionless blockchains (considered by some as the ‘real’ blockchains) enable anyone to participate in the system and are usually public.

Permissioned blockchains have been criticised for not being real blockchains because of the availability of a central figure.

In fact, some have accused these types of blockchains of piggybacking on the euphoric wave that was and is blockchain while failing to emulate its core structures. Yet, the advantages for those using permissioned blockchains – such as state entities – are increased privacy, and the ability to incorporate legacy systems and regulations.

A key characteristic of a blockchain is its reliance on trusted nodes. This is a major area of fallibility in the system as its security is heavily dependent on the people maintaining it. Such parties can include malicious developers, companies practising unethical business policies and dictators (or for that matter, AI systems that will be developed based on human mores).

But here’s an issue that is considered an impossibility in blockchain technology – hacking and tampering! Yes, the supposedly permanent, unalterable and distributed ledgers have been tampered with.

For example, in the case of a renowned cryptocurrency, a bad actor was able to rewrite the blockchain and not only remove the crypto coins from a cryptocurrency wallet and exchange them for cash but also take the coins!


In conventional payment systems however, banks and other central financial institutions enforce regulations that prevent double spending. A public permissionless blockchain does not have a central figure and instead, relies on trusted nodes or what Satoshi Nakamoto termed ‘honest nodes’ in the first paper to describe bitcoin and blockchain. And honesty is commonly in short supply.

If malicious nodes worked together, it’s possible for transactions to be rewritten by interrupting the record to omit necessary data. All that’s necessary for this to occur is the attacker nodes collectively controlling more computing power than honest nodes on a network – a vulnerability acknowledged in Nakomoto’s paper.

Even if those who maintain the blockchain are heavily vetted, and measures are in place to capture and prevent bad actors to secure the network, errors could still arise. Such errors could occur in the form of the quality of the data captured, which could be accidentally or intentionally inaccurate.

While the problem of occasional inaccurate reporting among data capturing methodologies is common across technologies, this is an issue that also plagues blockchain technology.

Another issue is permanence. The very nature of technology is its approaching obsolescence – and for a blockchain, this could strike at the heart of the tech and the unalterable data comprising ever-increasing blocks could cease to record data because of obsolete technology, and remain incomplete and vulnerable to attack.

While this feature is not a design or technological flaw inherent only to blockchain, it’s a disadvantage that must be accounted for in that backward compatibility or the transferability of data is planned.

Of course, when ledgers are tampered with as in the cryptocurrency example mentioned, money is lost, and the costs to individuals and business entities arise. As such, seeking remedial actions to address this may be difficult as a result of the technology’s setup and therefore, exorbitant.

Finally, a rather frustrating issue is in the legal codes surrounding blockchain. Although the technology is based on a distributed ledger system that could theoretically cut across national borders, dispute resolution can be complicated over jurisdiction, and the availability of laws as well as precedence.

Ironically, in the initial white paper, Nakamoto stated that the reliance on a trust based model, reversibility of transactions through mediation and the cost of mediation were considered weaknesses of online e-commerce. But blockchain too is plagued by issues that are similar and more importantly, integral to the security of the system as discussed above.

Furthermore, when the security concerns are mitigated, blockchain begins to resemble existing technologies such as encrypted cloud based systems and protocols. As a result, this and the associated security concerns may contribute to blockchain’s slow uptake and implementation across industries.