There are a handful of buzzwords that exist in the blockchain space, but none are as frequently used, and as improperly understood, as immutability. As one report from Deloitte defines it, “Data once stored on the blockchain cannot be manipulated or changed — it is immutable.” Fundamentally, this is an accurate assertion. Information added on a blockchain contains a unique summary of the previous block, ensuring that transactions cannot be edited or deleted unless a consensus is reached by nodes in the network.
However, amid this statement, there lies an important distinction. With agreement from participants in the network, information on a blockchain can be changed, leading to vulnerabilities in what is largely considered to be an impenetrable system. So, is blockchain actually immutable?
It’s a debate that’s taken over the industry, and has spurred a larger conversation between experts about how immutability impacts the current state of security in blockchain. Immutability in this conversation usually refers to the historical state of the blockchain, rather than true immutability. A primary example for this is hard forks, where the cryptocurrency community diverges on the rules behind a given token and resolves to change the record of the blockchain. In June 2016, an anonymous hacker stole nearly $55 million USD worth of ethereum through the Decentralized Autonomous Organization (DAO) and placed it on a 28-day holding period. The community debated what to do, and two groups ultimately formed in paving a path forward. One group decided to cancel the hack, returning the stolen currency to users, and the other decided not to alter the record. As a result, Ethereum and Ethereum Classic were born.
At first glance, having a system of checks and balances against large-scale hacking events like these might seem like a good idea. However, it has one unintended consequence: 51% attacks on Proof of Work (PoW) networks. Here, hackers take control of over 50% of the mining nodes in a given system, and are therefore given the power to alter the trajectory of the community. With heightened authority, hackers are able to interfere with the process of creating and editing new blocks, preventing new transactions from being validated, and doubling payments in an effort to counterfeit the system.
Unfortunately, it’s a phenomenon that only seems to be increasing in frequency. On May 26, Bitcoin Gold (BTG) suffered a 51% hack where a hacker took control of the BTG platform to steal nearly $18 million worth of cryptocurrency. On May 29, privacy-focused coin Verge suffered a similar hack resulting in net losses of $1.75 million in only a few hours. This was the third reported 51% hack on the Verge platform.
It’s clear that the current infrastructure of immutability on the blockchain is not sufficient to prevent bad actors from finding vulnerabilities in the system. Thankfully, industry experts realize this, and have started to come together in an effort to ensure that cybersecurity practices are a formative part of the planning process before — not after — a hacking event occurs. The first line of defense is instituting more due diligence for high-volume transfers and exchanges. Flagging frequent transfers and requiring more stringent compliance protocols will surely pay in dividends by ensuring authenticity. In addition, experts point to instituting merge mining protocols as a possible strategy to increase the hashrate of small-scale cryptocurrencies, making it more difficult to hack by 51% majority.
But perhaps the most effective strategy to ensure the immutability of blockchain is creating an open dialogue. With hacking events at an all-time-high, bringing leading industry experts in the cryptocurrency space together to exchange best practices about how to fortify their networks has never been more important. This was the mindset behind the creation of HoshCon 2018, a three-day conference in Las Vegas, highlighting substantive programming focused on emerging security technology and how it can be utilized to ensure that network immutability remains just that — immutable.
In returning to the above question: Is blockchain really immutable? It’s a complex question that requires a complex answer. Blockchain technology certainly carries many immutable characteristics that provide transparency and efficiency to cryptocurrency interactions. However, while supposedly permanent, there is still work to be done before blockchain ledgers will ever be considered “infallible”. There’s progress to be made, but we’re certainly on the right track.
Written By: Yo Sub Kwon, Co-founder and CEO of Hosho
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