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There has been a lot of hype of late about the potential far-reaching benefits of blockchain technology, a decentralized database for storing transaction records. And behind that excitement is a lot of promise: The tamper-proof technology behind bitcoin and other cryptocurrencies has the potential to change how business gets done in a plethora of vertical industries such as financial services, real estate, insurance and healthcare. Even national governments are pursuing the possible advantages of blockchain for country-wide initiatives: Estonia is working with a blockchain startup to secure its citizens' 1 million electronic health records with the technology.
Alongside the voices that have touted its potential use cases, however, there have been those that have raised thorny questions about various aspects of the blockchain system, especially blockchain security. Recent events, such as the theft of 3.6 million Ethereum coins from Slock.it's DAO (decentralized autonomous organization) fund, have also brought to light the potential flaws of this much-discussed technology.
Audience members at a blockchain session at the recent MIT Sloan CIO Symposium voiced some of these concerns. Here is how a panel of blockchain experts addressed their questions.
What data actually gets put on the blockchain and how much control do users have over it?
In a public blockchain system, users' information is not stored on the blockchain but rather with a third party such as Amazon. What's put on the network is a cryptographic hash of the transaction information in each "block" of the blockchain (blocks are collections of data regarding transactions made within a set time period). Panelist Anders Brownworth, principal engineer at blockchain-based payments app company Circle, said the hash proves that a user made the transaction at a certain point in time without revealing user information. Transactions are validated by miners, which are systems on the network that solve complex transaction-related algorithms and are afterward rewarded with a certain number of bitcoins for each block on the blockchain.
"You're not going to put absolutely everything on the blockchain because it doesn't make sense for everyone to have a copy of absolutely everything," said Brownworth, whose company has raised $60 million in funding and recently expanded to China.
Peter Nichol, a healthcare expert at PA Consulting Group, said that the hash is used to verify transactions and functions like an access control.
"A lot of the [standards] that you're already familiar with, like NIST and others that already control the level of access to information, can still be applied," he said.
Are blockchain use cases and blockchain security benefits overhyped? How secure is it, really?
Brownworth acknowledged that blockchain is overhyped and that a truly secure and tamper-proof blockchain record system is still theoretical. But after seeing the code behind the technology, Anders believes it is inherently secure.
"We're not hanging our hat on a governmental agency or a certain group of people; we're hanging our hat on the full faith and credit of math, of cryptography. That works for me a lot better than a group of people," he said.
Anders Brownworthprincipal engineer, Circle
Brownworth added that the nature of the database itself speaks to blockchain's security: It relies on its miners constantly trying to crack the correct hash inside a peer-to-peer network, using their hardware and software, to solve a block and access its information -- essentially what amounts to a brute force attack.
"What they do is take this attack and they turn it into a benign force so that instead of attacking the network to obliterate it, [it] rewards them with some financial gain from doing that," Brownworth said, adding that one way to measure the technology's security is that its "$7 billion bounty" -- how much the entire system is worth -- has yet to be claimed.
But even if the blockchain system is purportedly secure, what about user vulnerabilities? One audience member brought up the recent breach of the computer systems of up to 12 banks linked to Swift, a global financial system. The hack was possible because of a stolen private key. Brownworth admitted that blockchain isn't necessarily immune to social engineering attacks, but that doesn't mean there's anything wrong with the code.
"Stealing credentials and making valid requests on the network, signed by valid credentials ... that's not a direct attack against the encryption [itself]," he said. Cryptography, he said, is more trustworthy than people who have to remember and hold onto private keys.
Matthew Utterback, co-founder of Rex Mercury Inc., agreed, saying that people don't wholeheartedly trust banks for this reason.
"Everybody I work with has direct experience with a bank failure. We obviously need to educate people on ... their private keys. But being able to have this open source valuation [that blockchain has], yeah we can look at the code, and [seeing that], I sleep better at night," he said.
Check out part two of this discussion on blockchain security and privacy: Experts discuss how blockchain can be applied to electronic health records and how to balance privacy and digitization.
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