With rising institutional interest and adoption of various cryptoassets, including bitcoin but also many other crypto related applications, it seems worthwhile to revisit an often-stated, but potentially misunderstood aspect of blockchain-based assets. In any conversation, presentation, or casual discussion around blockchain or cryptoassets one of the most often cited traits of crypto is the immutability (unhackable) nature of blockchain transactions. As has been proven time and again, via the hacks and other breaches that have cost investors billions of dollars on an annual basis, the protocols, exchanges, and applications that investors leverage are not – as it turns out – immutable.
This might seem like a basic concept, and one that is hardly worth mentioning again, but given the speed and scope of adoption by institutions across the globe this is not something that should be overlooked. While the underlying blockchains might be immutable, although that has also been proven to not be an entirely accurate statement, the proliferation of applications and use cases that are dependent on blockchain infrastructure are far from immutable. Many of these applications are designed to make the user experience simpler, easier, and more convenient; all of which are worthwhile ambitions. That said, there are several items that advisors, investors, and users of cryptoassets need to keep in mind as development, adoption, and (unfortunately) hacks seem destined to increase.
Let’s take a look at some reasons why – despite near constant repeating – crypto is not necessarily as immutable as might be thought.
Exchanges are not immutable. Crypto exchanges and connected applications have routinely been hacked, breached, or otherwise compromised, which in turn has led to billions of investor losses. Compounding these losses is the reality that most – if not all – of said losses are not covered by investor insurance or other traditional products. As investors of all sizes continue to show increased interest in crypto investing and trading it is also worth noting that the user interface for logging into these exchanges do not have blockchain-enabled security or cryptography. For example, if a user has an exchange application installed on a smart phone or device, the only security protecting access to those funds is the traditional password protocols used to access the device and other applications.
Continue reading: https://www.forbes.com/sites/seansteinsmith/2022/08/21/crypto-immutability-only-works-if-all-layers-are-secure/?sh=7f871bde6960
This might seem like a basic concept, and one that is hardly worth mentioning again, but given the speed and scope of adoption by institutions across the globe this is not something that should be overlooked. While the underlying blockchains might be immutable, although that has also been proven to not be an entirely accurate statement, the proliferation of applications and use cases that are dependent on blockchain infrastructure are far from immutable. Many of these applications are designed to make the user experience simpler, easier, and more convenient; all of which are worthwhile ambitions. That said, there are several items that advisors, investors, and users of cryptoassets need to keep in mind as development, adoption, and (unfortunately) hacks seem destined to increase.
Let’s take a look at some reasons why – despite near constant repeating – crypto is not necessarily as immutable as might be thought.
Exchanges are not immutable. Crypto exchanges and connected applications have routinely been hacked, breached, or otherwise compromised, which in turn has led to billions of investor losses. Compounding these losses is the reality that most – if not all – of said losses are not covered by investor insurance or other traditional products. As investors of all sizes continue to show increased interest in crypto investing and trading it is also worth noting that the user interface for logging into these exchanges do not have blockchain-enabled security or cryptography. For example, if a user has an exchange application installed on a smart phone or device, the only security protecting access to those funds is the traditional password protocols used to access the device and other applications.
Continue reading: https://www.forbes.com/sites/seansteinsmith/2022/08/21/crypto-immutability-only-works-if-all-layers-are-secure/?sh=7f871bde6960
