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Public Blockchains: What are the Potential Risks?

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Public Blockchains: What are the Potential Risks?

Introduction

Today, you can visualize your blockchains as databases for validation. But validations sets don’t need a central authority to store information and groups don’t have to manage administrative processes. Instead, blockchain runs on peer to peer trading decentralized networks that are part of participants’ or nodes’ computers. Technically, it is an effective way to hand over the access control to individual users and then distribute data through an automated process.

Public and Private Blockchains

You can categorize blockchains into public and private groups. Public blockchain like Bitcoin, Ethereum, and other types of cryptocurrencies are more accessible for users on a basic computer system and internet connection.

When it comes to any asset change, public blockchains cut out the need for third parties. But public blockchains are resource-intensive and slow because of high redundancy. On top of all, public blockchains also take up a lot of computer power to maintain the main distributed ledger. Still, public chains are secure but they’re just not as secure as private blockchains.

Unlike public blockchains, private blockchains reintroduce third parties with some restrictions. In private blockchains, nodes need invitations for validation from the network. But public blockchains make sense when you have to decentralize a network.

Security Risks of Public Blockchain

  • Monopolize the Control

Huge mining pools and Bitcoin-based mining companies can monopolize control of the entire Bitcoin.

  • High Chance of Theft

There is a high chance for cybercriminals to steal a cryptocurrency.

  • Potential Exploitation

Security vulnerabilities run high because blockchain code is still evolving and subject to exploitation from hackers.

  • Inaccurate Timestamp

In some cases, when an attacker connects to a specific node for a specific transaction, he prompts an inaccurate timestamp. In short, the attacker alters the network time and tricks the node.

  • Double Spending

It is a serious threat where the attacker engages in multiple transactions with a single coin that leads to invalidation. In fast payment mode, this type of attack occurs most frequently.

  • Insecure Storage Options

Even the most reliable and popular storage mode for a cryptocurrency might be insecure.

  • Changing Laws and Regulations

Laws and regulations sometimes often require excessive control that may make it difficult to use blockchain.

  • Sybil Attack

Hackers can use blockchain-based cryptographic algorithms and other mechanisms to conduct malicious activities and without leaving a single trace.

Final Thoughts

In a limited decentralized blockchain, a lot depends on “how” you implement the blockchain in the first place. For the most part, there are various risks to build a financial infrastructure on a public blockchain. Unlike private blockchains that offer more transparency and control to participants over their transaction verification, public blockchains restrict access. But whether it’s a private or public-based blockchain system, both offer a high degree of transparency in terms of usability.

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