Another headache for crypto: Blockchain is vulnerable, says study

Now, in the summer of cryptocurrencies, a study is coming out that says that the underlying technology for digital money is vulnerable to tampering.

Blockchain, the public ledger used on computers around the world to keep track of bitcoin and the like, is often hailed as a great way to ensure that transactions are private. The point is to keep control of digital denominations out of the hands of the government or other central authorities, such as banks.

But blockchain is subject to other forms of centralization, according to a study by the Defense Advanced Research Projects Agency, conducted by a research firm called Trail of Bits. The report finds “unintentional centralities” in these allegedly decentralized systems that can let hackers outside or other tampering.

Three ISPs handle 60% of all bitcoin traffic, the report states. It warns that bitcoin “traffic is unencrypted – any third party on the network route between nodes (eg ISPs, Wi-Fi access point operators or authorities) can observe and choose to drop messages they want.” In other words, these people can take over crypto exchanges and take control of the digital assets.

Of course, blockchain users have to rely on a handful of devices to monitor the system, but DARPA casts doubt on its ability to deliver. It can be argued that this situation is very similar to the one that monitors the traditional money structure.

Joshua Baron, the DARPA program director responsible for the study, said in a statement: “We should not make a promise of security at face value, and everyone who uses blockchains for matters of great importance must think through the associated vulnerabilities.”

Since the peak late last year, bitcoin has lost two-thirds of its value, while other cryptocurrencies have also fallen huge amounts. It has encouraged cryptocurrencies, which claim that digital assets are worthless and will fail.

The conclusion of the DARPA study gets attention because the agency has a good reputation. It is best known as the government office that funded the establishment of the internet. The agency immerses itself in science and technology that ranges from computer security to new weapons.

Nevertheless, cryptocurrency fans are not impressed with the blockchain verdict. Take Ric Edelman, founder of a consulting firm now known as Edelman Financial Engines, and a credible advocate for crypto. He points out in an interview that crypto and blockchain are still in their infancy, with major flaws that have not yet been resolved.

The car has been around since the 1930s, and it took until the 1960s to add seatbelts like seat belts, he claims. “Blockchain technology is only 13 years old,” he adds.

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Tags: Banks, bitcoin, blockchain, cryptocurrency, DARPA, Government, Ric Edelman, Trail of Bits