It is estimated that bitcoin exchanges may have been involved in up to 60 high-profile hacking incidents since the digital asset class was created in 2009, with the most recent breach involving the loss of 119,756 coins worth of $70 million. Therefore, BOHH Labs – a security startup – suggests that organisations should be cautious before overcommitting to this technology.
Simon Bain, CEO of BOHH Labs, questions whether blockchain – the technology at the heart of bitcoin – is in fact a breakthrough waiting to happen or just the latest craze to hit the market, backed by marketing hype.
Bain explains: “Blockchain is developing as one of the hottest cyber security and information-sharing solutions right now, and the core idea around this technology is a great concept, encouraging organisations to take their security more seriously. In fact, while the word ‘security’ has previously been used by companies as an excuse to avoid specific details, blockchain has piqued the interest of many consumers, with many keen to understand what the technology is and how it can impact how their data is managed.”
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With that being said, Bain also suggests that it’s too soon to applaud blockchain as the end to all security woes; there are still several areas that need to be addressed. He adds: “While blockchain is a great tool for helping the security of transactions and making sure these are secure, this technology won’t secure the end databases. This is because in practice blockchain focuses on securing the external world and exchanges, but it does not look at the underlying security of the data. This is where blockchain adoptees need to be diligent.”
“Users put a lot of trust into the fact that these digital currency exchanges based on blockchain have the right security protocols in place, yet time and time again they have been shown that they are breachable and your money could easily be stolen.”
What’s more, as there are no regulations or reimbursement structures in place yet, when blockchain and cryptocurrencies experience security issues, the question of ownership comes to the forefront. In fact, there is still a lot that remains unsettled when it comes to regulation statuses, and there are no current rules around offering insurance on digital currencies. The way blockchain based-transactions are set up now, no one will step in to help, and that is too great a risk to have the public exposed to.
>See also: Blockchain’s future outside financial services
As such, Bain encourages organisations to employ a more holistic approach when securing their data by examining the various security solutions available.
“While there are both advantages and disadvantages to blockchain, one thing is clear; as an industry, we need to look at all the solutions available – not just lay all of our eggs in one basket – and find ways to secure our information end-to-end and not just settle for the solutions that are hot for the moment,” he concludes.
Blockchain: the unstoppable tech phenomenon?
This timely warning comes after an announcement today that several major energy firms – including BP and Shell – are partnering on a new blockchain-based trading platform.
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Their idea is that the blockchain-powered platform for energy trading will eventually be open to all market participants, according to reports. The plan is for this platform to be fully operational before the end of 2018.
Carolien van der Giessen, a representative from ING – a member of the blockchain platform consortium – told CoinDesk in an email that: “Earlier this year another joint initiative among some members of the consortium (ING, Mercuria, and Societe Generale) presented compelling results with what we understand to be the first blockchain prototype test in the sector. The experiment involved an oil cargo shipment containing African crude oil which was on its way to China. The results of the experiment demonstrated that a blockchain based platform can greatly improve the efficiency of certain processes.”
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