This article will teach you about the security of blockchain networks and how they help keep your transactions safe and secure.
Since its inception, many malicious activities have threatened the security of blockchain networks. In August 2010, a hacker siphoned 184 billion worth of Bitcoin by adding a bug into the Bitcoin network. However, the bug was quickly identified and erased from the blockchain by developers.
You can imagine what would have happened if the hacker had been successful and the bug hadn’t been identified. The existence of blockchain would have been greatly threatened. There have been many industries that adopted blockchain technology for the transfer of data. The technology boasts of an iron-clad defense system that is highly improbable to hack. Although the industry has boomed graciously, its security has been threatened by hackers and different scams.
What makes up the Blockchain Security System
As a decentralized and digitized ledger, blockchain boasts a tightly secure peer-to-peer encryption method of confirming and verifying transactions. Blockchain networks use a distinct protocol to verify transactions; hence false operations are detected easily. The security in blockchain systems is built on the following:
This is a special method of the wallet where you are provided with a unique key called a “hash.” Hashing is a mathematically generated process that is peculiar with public-key cryptography. Specific and fixed output is generated irrespective of the number of times the function is used. It is the key to every user’s safety deposit box in the crypto space.
Type of fraud in the Crypto Space
This is a form of fraud where scammers send out emails that mimic reputable and trusted companies’ emails. These malicious emails are sent to wallet owners, asking them to provide their personal information on the make-believe link. Therefore, phishing scams use the user’s computer as a host for illegal cryptocurrency mining. A report showed that blockchain investors lost $225 million in the first half of 2017 alone.
This involves the creation of multiple false identities on a peer-to-peer network. In a blockchain system, Sybil attack runs various nodes simultaneously, swarming the network with these false identities, causing the system to crash. The name is coined from Sybil’s titular character, who was diagnosed with a dissociative identity disorder.
Blockchain technology depends greatly on the upload and download of information in real-time. In a routing attack, a hacker intercepts data sent to internet service providers. The hacker partitions the blockchain system, but the system will appear to be functioning optimally. Meanwhile, the hacker is making away with funds from the system.
Measures to Prevent Cryptocurrency Fraud
Users, exchanges, token, and blockchain companies have realized the need to learn from the past and identify and neutralize fraud in the peer-to-peer network. Here are some of the measures to checkmate hackers:
Two-factor Authentication (2FA)
Also called two-step authentication, 2FA is a familiar term in the blockchain space. It is an added layer of your wallet security where you provide your wallet key and provide a one-time password or OTP. It is generated in real-time to access your wallet. This way, if a hacker gains access to your user password, the hacker will have to own the pre-set OTP device before he can access your wallet. This guarantees an extra layer of security against attacks like phishing.
This software is specially designed to identify malicious links, email threats, fake websites, etc. In most cases, it approves legitimate websites and links. Some anti-phishing software is capable of verifying web addresses on a mass scale.
Cryptocurrency companies can protect themselves from falling victim to repeated patterns if fraud by identifying fraudulent initial coin offerings (ICOs), phishing patterns, and identity thieves and blacklisting them.
A cold wallet is not connected to the internet; hence it is less vulnerable to hacking and other malicious attacks. A cold wallet is much more secure and is readily available to users in the form of a device.