Are blockchains safe?

Watch Video
03:59 minutes
Watch Video
03:59 minutes

What is the main concern people have about blockchains? By now, you should be starting to understand what blockchains are and why we use them. One of the largest reasons that people resist this powerful new technology, though, is that they question its safety and security. Many individuals learn a bit about blockchains but then disregard them because they fear losing their wealth to hackers, computer errors, or other unforeseen difficulties. Quite simply, alternatives like traditional banking are seen as "tried and true." We've used banks for many years and most people have never had significant problems with them. So why would we adopt a new, relatively unproven method of doing the same thing? Are blockchains really safer than traditional banks? The reality is that blockchains are actually much safer than traditional banking in many ways. Blockchains operate with three levels of security that protect their users in ways that other alternatives don't. These three levels are decentralization, cryptography, and points of verification known as miners and/or nodes. When we say that blockchains are "decentralized," we're describing the fact that there is no single authority that controls blockchains. This also means that there is no single point of failure. If you use a traditional bank, for example, you're placing tremendous trust in that bank. You're relying on them to handle your money safely and you can only hope that they provide the services they promise. Many times, reality doesn't match these expectations. Individuals experience delays in payment, withdrawal, and money transfers. In extreme cases, accounts are frozen for reasons that customers do not understand. What is the main difference between “trusting” a bank and “trusting” a blockchain? If you place your trust in a blockchain rather than a bank, you're not trusting any single entity. You're trusting technology. Blockchains are executed by software that is run by any computer or machine running that software. This means that there is no centralized authority that is capable of making mistakes or supervising your actions in any way. As long as the software runs properly, the system is perfect. What is cryptography and why does it improve security? The second level of security is cryptography. When you use a blockchain to store wealth, that wealth is stored in a location that can only be accessed with a unique alphanumeric address that is referred to as a "private key." Private keys are so secure that if a malicious individual wished to hack your private key, they would need to spend enormous amounts of time, energy, and resources in this endeavor and they would still almost certainly fail. For this reason, it is not economically viable for someone to try and steal your wealth stored on a blockchain. How do miners/nodes work? The third and final level of blockchain security is miners and/or nodes. These miners/nodes participate in a blockchain by continually verifying all transactions that occur on that blockchain. Rewriting or corrupting of a blockchain's data is virtually impossible because miners/nodes are always ensuring that all of a blockchain's data adds up. In order to change the data in a way that would compromise a blockchain's integrity, an attacker would have to gain control of the majority of the miners/nodes on a blockchain. Because this isn't feasible, blockchains are considered virtually immutable. Should you trust blockchains? Decentralization, cryptography, and miners/nodes represent three extremely efficient levels of blockchain security. Although there have been attacks on blockchains in the past, the technology is always improving and is already far safer than it is given credit for by the general public.

text