Running head: RESEARCH PAPER ON BLOCK CHAIN Research Paper on Block Chain: How Block Chain Works and Its Vulnerabilities Alqubaisi Noura Dr.Haydar CTEC350 Nov, 28 2018 1 HOW BLOCK CHAIN WORKS AND ITS VULNERABILITIES 2 Block Chain Technology Blockchain technology is an undeniably ingenious invention. According to Singhal, Dhameja, and Panda (2018), it is the brainchild of individuals known through their pseudonym, Satoshi Nakamoto. Since its invention, the technology has evolved into something significant but most people still have the question of what it is and how it works and also, the vulnerabilities involved in engaging in this form of technological exchange. The research paper aims at discussing how blockchain technology works and its vulnerabilities. How Block Chain Technology Works Blockchain can be termed as the most significant invention since the internet itself. This technology allows people to exchange value without the need for earned trust or any central authority. While exchanging is blockchain, neither trust nor agreements are optimal solutions. People involved in this trade cannot trust strangers and enforcing any contract amid them requires an investment of time and money. It is quite interesting because, during the value exchange, the technology offers people a third option which is less costly, fast and secure as stated by (D'Aliessi, 2018). The most renowned use of blockchain invention is the use of bitcoin- a digital currency which can be applied to exchange goods and services just like any other form of currency for instance Dollars and Euros. Just like any other currency, a bitcoin has no value unless it is involved in the exchange of goods and amenities to bring more of the money under people’s control and have confidence in that other to do the same as stated by (D'Aliessi, 2018). In order to keep track of the number of bitcoins each individual involved in an exchange owns, the blockchain technology uses a Ledger. According to (D'Aliessi, 2018), a ledger is termed as a digital store that HOW BLOCK CHAIN WORKS AND ITS VULNERABILITIES 3 keeps tracks of all bitcoin exchanges. Like in a physical bank, the ledger file is not stored in a central server but rather, it is distributed across the globe via a network of anonymous computers which both store the data and at the same time execute computations. Each of the networked computers signifies a node of the blockchain system and has a duplicate of the ledger file. For a person to exchange using blockchain, they need a program that allows them to store and exchange their bitcoins. This program is known as a wallet. According to Singhal, Dhameja, and Panda (2018), since only the wallet owner has rights over the stored bitcoins, each of the wallets in the system are protected using a special cryptographic method that has unique private and public keys used for identity verification. If a message is encoded using a particular public key, only the holder of the corresponding private key can decode and access the message. The reverse is also true. If a person encrypts a transaction message using a particular public, only the individual who has rights over the private key can decrypt and read the stored message. When a person encrypts a transaction request with their wallet’s private key, they generate a digital signature which blockchain computers use to verify the source and the legitimacy of the deal. If a person changes a single character in the transaction request message, the online signature will be altered and therefore, no potential attacker may modify the transaction requests or change the number of bitcoins one is sending. For a person to be able to send bitcoin, they are required by the blockchain system to prove that they own the private key for a specific wallet since the key is needed to encrypt the exchange request message. Since a trader can only broadcast a transaction message after it has been encrypted, they never have to reveal their private key as stated by (D'Aliessi, 2018). The blockchain technology does not record the account balances but rather, it only keeps records of all transactions that have been successfully approved and verified. According to Singhal, HOW BLOCK CHAIN WORKS AND ITS VULNERABILITIES 4 Dhameja, and Panda (2018), for a person to determine their balance, they need to asses and verify all the trade exchange that ever occurred on the entire network connected to their wallet. This verification is done depending on connections to previous trades. These connections are termed as inputs and they have the responsibility to verify the wallet amount and ensure that the inputs have not been sent yet to ensure that there is no double-spend of bitcoins. For numerous individuals, blockchain and bitcoin are substitutable. But the fact is that bitcoin is one of the numerous applications of blockchain technology that has what it takes to revolutionize numerous industries in the globe’s economy. Basically, blockchain is simply a dispersed ledger that is authenticated and secured by a system of peer to peer nodes as stated by Mainelli and Smith (2015). This technology has various components which include: This is termed as the most critical component of blockchain technology because, it leads to all benefits such as trust, censorship resistance, and immutability. It the core of this technology, it has enabled individuals to establish systems that do not depend on a centralized third party to maintain the safety of their money. Due to the distributed nature of blockchain, no central storage can be taken down by either the government or extremists for personal advantage as stated by Sharma (2018). One of the central tenets of digital currency is to prohibit double spends. According to Sharma (2018), for a transaction to be legitimate, it requires that there are no previous entries in the ledger could be altered. Blockchains are precisely useful in such cases since changing any entries in the ledger necessitates an attacker to have more computing power than those of all the miners protecting the system which is termed as 52% attack. This is not in personal gains of the attacker as this attack requires a huge amount of capital to organize and therefore, it is less probable to occur. HOW BLOCK CHAIN WORKS AND ITS VULNERABILITIES 5 Block chain’s most crucial appeal perhaps lies in the fact that it is distributed. According to Mainelli and Smith (2015), in basic terms, there is no third party that traders have to depend on keeping their funds safe. The dispersed peer to peer structure of miners shields the network via Proof of Work hence, eradicating the need to rely on brokers. The whole blockchain code is open source and accessible for any person in the globe who might want to examine hence, removing the potentials of backdoors being established into the network. This aspect ensures that people could become personal banks and have much more say on how their funds are used as opposed to trusting financial institutions to safeguard their money. Despite the congestion being experienced on the bitcoin’s network currently, block chains are one of the quickest means to transfer value internationally. According to Sharma (2018), this is because there exists no intermediary to handle disputes in the case of Bitcoin. All trades on the Bitcoin blockchain are final and irreparable. This makes the operation of bitcoins similar to how cash exchange works where all payments made are final and irrevocable. Financial institutions have to deal with numerous clients’ related challenges in order to ensure smooth operations. But, these extra services cost money which is passed to the end user causing too high transfer and withdrawal fees experienced by customers. Vulnerabilities of Block Chain Technology Just like any other digital systems, blockchain technology is vulnerable to some security issues. This technology is prone to numerous issues which are not experienced by centralized systems as stated by Eisenberg (2018). These vulnerabilities include end-point security issues. These are the spaces where the blockchain system and people meet. For the most part, these are computers that persons and corporations use to gain access to block chain-founded services. HOW BLOCK CHAIN WORKS AND ITS VULNERABILITIES 6 Blockchain begins with info being inputted in a computer and comes to an end with info being outputted in a computer. During this process when a person tries to access a blockchain, the data on the chain become vulnerable. The credentials that are needed to access a mutual distributed ledger file can be exposed to security weaknesses at the endpoint as stated by Eisenberg (2018). Vulnerability is Public and Private Key Safety. For a person to gain access to a blockchain, they require both a private and a public key. According to Eisenberg (2018), these keys are termed as a cryptic string of characters of appropriate length which makes guessing them truly astronomical. It is impossible for a person to access data if they do not have the keys which make the technology safe but on the other hand, it only requires the keys to fall in the hands of hackers and the information is accessed and altered. Any moment that these keys are typed, shown or stored in unencrypted gadgets, the snooping eyes of cracker can get them. Untested at Full Scale are also common vulnerabilities. Most industries prefer to think about what would happen at full scale and blockchain industry is no different. According to Eisenberg (2018), the architectures of the blockchain systems are integrally scalable. In fact, any time an alteration is made to the blockchain, it balances up. After a certain amount of modifications, it scales up by one data blocks. Up to now, there are no recognized security issues arising from the organize expansion of block chains however, a US government organization which oversees the financial stability of businesses is still not sure that this will remain the case. According to a report by the organization, each time a blockchain grows, it leads to two risks. First, since block chins are currently as large as always, we are approaching an unknown territory with each gigabyte of growth. With limited experience in this industry, it signifies limited ability to identify and respond to challenges. Secondly, the FCOS body is also concerned HOW BLOCK CHAIN WORKS AND ITS VULNERABILITIES 7 that block chains systems may not be able to detect fraud hence, having a good number of traders conspire against the others as stated by Eisenberg (2018). Additionally, lack of standards and regulations makes block chain more vulnerable. The mere mention of either laws or standards puts blockchain industry purists on high alert. Arguments can be made that for those who engage in bitcoin and cryptocurrencies trader can continue to enjoy their anonymity which led to the growth of blockchain while others precisely the government and monetary institutions may argue that the industry must be regulated. It is necessary to enforce laws to control block chain trade to get rid of any fraudulent activities and also, put standards to reduce security risks occurring when different technologies are merged as stated by Eisenberg (2018). Conclusion Since the invention of blockchain technology, it evolved into something significant but most people still have the question of what it is and how it works and also, the vulnerabilities involved in engaging in this form of technological exchange. Even with the questions, this technology allows people to exchange value without the need for earned trust or any central authority and the most familiar application of blockchain is bitcoin. For a person to exchange using blockchain, they need a program that allows them to store and exchange their bitcoins which are known as a wallet. Even though the technology has continued to become successful, it is exposed to various vulnerabilities which makes it security capability questionable. To reduce these issues in the future, it is necessary for the technology to invest more on safety and security so as to protect the traders. HOW BLOCK CHAIN WORKS AND ITS VULNERABILITIES 8 References D'Aliessi, M. (2018, November 27). How Does the Blockchain Work? – Member Feature Stories – Medium. Retrieved November 28, 2018, from https://medium.com/s/story/how-doesthe-blockchain-work-98c8cd01d2ae Eisenberg, A. (2018, July 30). 5 Blockchain Security Risks and How to Reduce Them. Retrieved November 28, 2018, from https://igniteoutsourcing.com/publications/blockchain-securityvulnerabilities-risks/ Mainelli, M., & Smith, M. (2015). Sharing ledgers for sharing economies: an exploration of mutual distributed ledgers (aka blockchain technology). Sharma, T. K. (2018, February 05). 5 Critical Components of Blockchain Technology. Retrieved November 28, 2018, from https://www.blockchain-council.org/blockchain/5-criticalcomponents-of-blockchain-technology/ Singhal, B., Dhameja, G., & Panda, P. S. (2018). Introduction to Blockchain. In Beginning Blockchain (pp. 1-29). Apress, Berkeley, CA.
Purchase answer to see full attachment