8 Unexpected Blockchain Security Risks

The blockchain is conquering the world at a surprisingly high speed. The benefits of using blockchain for various transactions are so numerous that people forget about the possible risks.

The ability to bring together decentralized populations to interact and collaborate, the lack of physical borders, the transparency, and seeming security has created an overwhelming demand for blockchain. But is it as secure as it might seem? Bitcoin and blockchain accounting experts draw our attention to the possible blockchain security risks.

1. Surprisingly High Error Rates

Learning how to use blockchain is not as easy as it seems. Contract mechanisms, exchanges, various protocols and much more require successful integration into the system. The lack of information and time to learn the ins and outs of the system have led to hacks, lost keys, and smart contract bugs. These problems may result in huge monetary losses.

2. Losing Private Keys

Private keys are an integral part of keeping the blockchain transactions safe. Losing a private key means saying goodbye to the encoded information. Since the key can’t be recovered, it can lead to formidable monetary and data losses. Accidental passing of the private key to the wrong party gives it full access to your encoded data and the ability to handle it without adverse consequences.

3. Unsafe Trading Platforms

The number of third-party trading platforms seems to be increasing exponentially. Users can buy and sell any product using cryptocurrencies. The trading is fully anonymous, meaning that criminal actions are booming. Ransomware, money laundering, and underground markets are among the few illegal activities connected to blockchain.

4. Vulnerable Smart Contracts

Blockchain transactions are regulated by smart contracts. The lack of attention and information while creating the smart contracts lead to unfortunate consequences and financial losses. At the same time, the vulnerability of the smart contracts may be caused by program bugs. The number of bugs is numerous and can cost the parties large sums of money.  

5. Absence Of Solid Regulations

Blockchain is fairly new and popular. This volatile mix becomes dangerous due to the lack of regulatory oversight. Market manipulations are on the rise. Scams and hacks are virtually unpunishable. Regulators don’t seem to have sufficient resources to keep up with the blockchain innovations. As a result, Ponzi schemes, wallet hacks, and criminal platforms pose a huge risk to investors and traders without proper expertise.

6. Exchanges And Wallet Scams

At the moment, there is no guarantee that the exchange you are trading on or the cryptocurrency wallet you are using is 100% safe. At any time, it can either be closed by the government due to shady activities or simply disappear with your money. The lack of regulations and anonymity is the breeding ground for crime and fraud.

7. Cryptography Problems

The strength of the cryptographic algorithms dictates the security of blockchain. Many algorithms such as ECSDA are prone to fault attacks. A big number of blockchain implementations use software solutions to generate private and public keys. Just like any random number generating software, the one they use is subject to brute force attacks.

8. Risky Implementation

Poor implementation of smart contracts and identity management allows hackers to get access to the blockchain and steal the information. This can result in such fraudulent actions as double spending, key hacking, non-compliant transactions and more. When it comes to blockchain, human error in implementation is common due to lack of information and education.

Since blockchain is just making its first steps in our universe, errors and security risks are numerous. The majority of them is bound to be rectified in the nearest future.