A report commissioned by the Pentagon concluded that blockchain is not decentralized, vulnerable to attacks, and is running outdated software. Report, “Are Blockchains Decentralized, Unintentionally Centralized in a Distributed Ledger?discovered that a small group of participants could have “excessive and centralized control over the entire blockchain system”.
The report’s findings are cause for concern in many areas, but are particularly critical for the security, fintech, big tech and crypto industries, which continue to evolve.
The Pentagon’s research team, the Defense Advanced Research Projects Agency (DARPA), has joined Trail of Bits – a security research organization – to investigate blockchain. Trail of Bits focuses on Bitcoin and Ethereum, the top two companies electronic money on the global market.
Trail of Bits says that it only takes four entities to break Bitcoin and only two to disrupt Ethereum. Also, 60% of all Bitcoin traffic only travels through three ISPs. Outdated and unencrypted software and blockchain Protocols have also been defined by the organization.
Cryptocurrencies and the new era of digital finance
The Pentagon report comes just weeks after Luna Crypto Crash. In May 2022, the decentralized stablecoin TerraUSD – pegged 1:1 to the US dollar – dropped to 30 cents when an algorithm running on the blockchain crashed. Financial experts warn that the Luna crash is an important lesson about the risks of blockchain.
Since the Luna incident, crypto has been in a state of total meltdown with billions of dollars lost and investors cashing out of their crypto assets. Cryptocurrencies continue to be impacted by the global economy, supply chain problems, rising federal interest rates, inflation, and a looming recession. DARPA’s Authorized Report only adds to blockchain concerns and affects investors’ perception and confidence.
Furthermore, the world of cryptocurrency and blockchain operations is currently entangled in many industries that have drawn up plans to use cryptocurrencies due to their agility, immediacy, product potential, and ability to provide easier access to financial services for people around the world. Security remains a priority, challenge and concern in this new digital financial era.
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Blockchain security challenges
“The security of a blockchain depends on the security of its software and the protocols of its consensus mechanism or off-chain governance,” the Trail of Bits report said. Trail of Bits researchers have signed up multiple accounts with mining pool sites to study its code as it becomes available. Their discovery is shocking.
According to Trail of Bits, ViaBTC, a leading global mining pool, assigns a password of “123” to its accounts. Pooling, another mining organization, doesn’t even validate logins, and Slushpool – which has mined over 1.2 million Bitcoins since 2010 – instructs users to skip the password field. Combined, these three mining pools account for about 25% of Bitcoin’s hash rate, or total computing power.
Trail of Bits warns that nodes used by cryptocurrency miners can easily be deployed using an inexpensive cloud server. They can be used to flood the network during a Sybil attack. Sybil attacks can perform an eclipse attack, where a malicious actor seeks to isolate users by denying access to nodes.
Trail of Bits presented evidence that the dense subnet of public nodes is largely responsible for reaching consensus and communicating with miners. One example of a Sybil attack involved a malicious actor believed to be from Russia. The attacker gained control of up to 40% of Tor exit nodes and used them to rewrite Bitcoin traffic.
In addition, software bugs and errors are also a major security concern in blockchain. Ideally, all buttons should work under the same latest version of the software, but that’s not the case. Software bugs have caused blockchain failures in Ethereum, and 21% of Bitcoin nodes are running an older version of the Bitcoin Core client, which is known to be vulnerable, Trail of Bits said.
Blockchain software developers and maintainers and millions of crypto users around the world are also being targeted in the attacks, along with mainstream tech websites starting to use the chain. block as a new source of income.
Big Technology and the Web3 Marketing Revolution
The new DARPA report uncovers big tech at a pivotal time, with many leading companies already investing heavily in blockchain technology. For decades, the main source of revenue for big tech companies has been online advertising. However, a global trend fueled by user privacy concerns is bringing the era of third parties to an end, significantly affecting online advertising revenue.
All the big tech companies — Meta Platforms, Spotify, Paypal, Twitter, Google, Apple, Alibaba, Microsoft and others — are turning to Web3 and blockchain in search of new sources of income.
For example, in 2016, Microsoft developed Project Bletchley, a blockchain as a service (BaaS) project. Since then, the company has continued to explore crypto opportunities. In 2021, Microsoft is also awarded US Patent for blockchain software that will generate cryptocurrency tokens. On May 31, 2022, Microsoft announced that it will allow advertising for cryptocurrency exchanges in the United States, limited to the Microsoft Search Advertising Network.
While Microsoft focuses on technical solutions, other companies like Meta Platforms or Twitter, direct their investments towards mainstream blockchain usage. On November 10, 2021, Twitter officially launched Twitter Crypto – a group specializing in cryptocurrency – to build its blockchain and Web3 services. Cryptocurrency Expert Tess Rinearson, working with cryptocurrency since 2015, was called to lead the team. Twitter has been exploring and developing crypto payments, crypto tricks, creator monetization, NFT, and social media decentralization.
In November 2021, Apple CEO Tim Cook said during the NYT Dealbook Conference that the company is looking into cryptocurrency. Although Cook didn’t reveal exactly what Apple was doing, he did suggest NFT and accept cryptocurrencies on Pay for apple.
The new Trail of Bits report warns the big techs, as they develop their future. “The report shows the need to continue to be considered carefully when evaluating new technologies, such as blockchain, as they proliferate,” said Joshua Baron, DARPA program director overseeing the research. in our society and economy”.
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The Rise of the Cryptocurrency Market, Risks and Opportunities
Cryptocurrencies have seen widespread adoption during the pandemic years, which has spurred global digital transformation and acceleration. In 2021, after 12 years, Bitcoin has reached a milestone that companies like Amazon, Apple or Microsoft have reached in 21 to 44 years: A market valuation of A$1 trillion. As the popularity of cryptocurrencies has grown, governments and banks have stepped up to stay ahead of the curve, often testing the waters to regulate the sector, but without success.
One of the biggest challenges of blockchain is its global scaling dimensions and rich diversity. The “Global Cryptocurrency Market” report of SkyquestCryptocurrency market valuation is $1.85 billion in 2021 and it is expected to reach $32.5 billion by 2028. Not only millions of users turn to cryptocurrency but thousands of companies New and old companies are currently working on blockchain.
Roland Berger says there are around 12,000 active crypto projects and companies as of January 2022. The number of Crypto Unicorn companies – valued at over $1 billion – has grown by a staggering 491% in 2021.
A vulnerable blockchain environment – as described by the Trail of Bits report – puts these companies, their investments, years of work, and hundreds of thousands of jobs at risk.
These companies are developing financial services, cryptoassets, metaverse, NFT, supply chain management solutions, capital markets and insurance products as well as mining and staking cryptocurrencies. , among others. They are ready to disrupt and affect all industries. But is the world ready for a blockchain change?
Baron from DARPA concludes: “We should not make any promises of security above face value, and anyone using blockchain for issues of high importance should think twice about security vulnerabilities. related confidentiality.
