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Blockchain is ‘NOT’ Foolproof – Study Reveals

A professor at MIT (Massachusetts Institute of Technology), Stuart Madnick, lashed on blockchain by stating that the technology is not as foolproof as widely perceived. In addition to exploring more blockchain use cases, there has been severe criticism against the nascent technology as well.

Since the inception of bitcoin, the underlying technology, blockchain has attained the attention of many. Madnick, who is a professor of Information Technologies at the MIT Sloan School of Management and the founding director of Cybersecurity at MIT Sloan (CAMS) research consortium, supervised a study in which about 72 cases of security breaches in blockchain projects from 2011 to 2018 were scrutinized.

After studying the cases, Madnick concluded that transparency, distributed control and anonymity while being the signature traits of blockchain, introduced extreme vulnerabilities in the blockchain based systems.

Regarding anonymity, Madnick suggested that under the circumstances of losing a key, it was impossible for a user to recover his blockchain account’s key. An example is the case of Quadriga CX where, with the death of CEO Gerald Cotten, access to the cryptocurrency of millions of dollars worth was lost as the key only known to Cotten couldn’t be retrieved. Madnick urged that anonymity was more useful for people such as hackers and criminals who aimed to execute illicit transactions or were looking to get away with ransomware payments. These were the types of users who couldn’t afford to reveal their identities and therefore preferred anonymity the most. Madnick summarized:

The bottom line is that while the blockchain system represents advances in encryption and security, it is vulnerable in some of the same ways as other technology, as well as having new vulnerabilities unique to blockchain. In fact, human actions or inactions still have significant consequences for blockchain security.

Furthermore elaborating on how key features of blockchain were its biggest flaws, Madnick stated that transparency, besides allowing people to view the software and check for flaws, allowed bad actors to access and explore blockchains for flaws not visible to others.

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After doing so, bad actors tried their best to capitalize as many gains as possible. Related to distributed control, Madnick stated that lack of switches like those in centralized systems that can be used to switch on or off the entire system, blockchain based systems can’t be immediately shut down for once and all, if there’s an emergency. He mentioned the scenario of a flash crash, where the price of some asset or commodity experiences a steady decline due to automated trading could not be effectively dealt if the system was built on a blockchain.

Many of Madnick’s claims convey the facts but somehow they don’t display the entire reality of blockchains. For instance, transparency introduced by blockchains in finance sector allows one to track the course of a transaction and detect if there were some illegal intentions behind transactions.

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As the details of transactions are stored on a public ledger, the transparency provided by blockchain prevents large financial institutions to use their customers’ funds like they were used to in the past. Apart from that, the transparency attribute if expanded to other sectors such as the supply chain can ensure that anyone consuming a product is well aware of its details like manufacturing date, ingredients, etc. Once relevant information is stored on a blockchain by manufacturer, it’s impossible to alter or modify it later.

Distributed or decentralized aspect of blockchains is more praised than argued by people. As blockchains are decentralized, single point of failure is easily prevented by blockchain. Added to this, unlike centralized systems where authorities can easily manipulate any information, data stored on blockchains isn’t under the control of institutions or authorities. This means that data manipulation to deceive or gain personal gains is well safeguarded on the blockchain.

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It is true that anonymity has been a strong and useful weapon for hackers and criminals but it’s not only anonymity that has been resulting in mishaps. Bad actors are almost present in every environment and sector. With technology advancements, their techniques and tools also got updated.

There have been several incidents where banks, wallets, internet, etc., frauds on large scale were executed by hackers. Millions of dollars and classified information have been lost on numerous occasions due to security breaches yet still, those particular systems such as banking aren’t held responsible like cryptocurrencies are blamed at the present. Blockchain, being the technology behind cryptocurrencies, is put under tremendous pressure.

Madnick’s search and claims that blockchain stand authentic and accurate but as blockchain is considered in a nascent phase, those claims certainly don’t mean that the technology doesn’t have use cases. Applications of blockchain are getting diversified with the passage of time and it is expected that blockchain will be offering use cases to a lot more sectors.

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Fatir Malik

Electrical engineer by profession, turned into blockchain developer. Fatir contributes regularly with his insights about latest developments in fintech sector. Contact the editor at editor.opinions@blockpublisher.com

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