The introduction of blockchain technology has opened doors to new opportunities. It helped make data sharing easier and secure. However, it can be vulnerable to cyber security attacks.
What It Offers
Blockchain technology was created to provide a decentralized distributed ledger that records digital assets. A single ledger gives access to thousands of connected computers and servers. With this, a user can complete transactions without the involvement of a third-party intermediary.
Here is how it works:
- A user creates a transaction using a blockchain network
- A block will then be created. It represents the creation of the transaction.
- The requested transaction will be broadcasted over the network that will validate it. The peer-to-peer network is made up of computers, which are called nodes.
- The verified transaction will be combined with other blocks. Thus, creating a new block of data for the said ledger.
There are various types of verified transactions. These include any valuable information shared in the ledger, contracts, cryptocurrency, and records.
Blockchain Technology and Cyber Security
While blockchain aims to provide a secure environment, it can still be vulnerable to attacks involving cybercriminals.
One of the most known applications of blockchain technology is cryptocurrency. The industry has been seeing growth in the past few years. However, it has also become a target of many cyberattacks.
For instance, the Poly Network platform has experienced the biggest crypto heist ever. Hackers successfully stole around $600 million in cryptocurrency from the decentralized finance (DeFi) platform.
While the stolen funds were returned, the theft highlighted a vulnerability in the platform’s security features.
Reducing Risks with Better Security
The Poly Network is only one incident among multiple thefts targeting blockchain. That is why cyber security is vital. Platforms must ensure proper protocols are taken to protect their users.
One form of protection is to get insurance. In the crypto industry, some insurance providers offer coverage for asset owners. That said, insurance comes with limitations. Aside from availability issues, there is a lack of legal and regulatory clarity in the insurance of crypto assets. Some platforms also conduct stability initiatives to strengthen their customer protection systems.
Three steps can help with this.
First, there is a need for better regulation, especially when an entity reaches a certain size.
Second, developers should take extra caution. For instance, they can get audits for every project.
Third, users should practice self-protection. This step is crucial. After all, many hacks and scams succeed due to the vulnerability of the users to attackers.
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