Do you have an interest in blockchain or you are a part of a public blockchain? If yes, this is what you need to know. First thing first, what are public blockchains? As simple as you think, it is a decentralized platform with no single entity ruling the network. Hence, it is secured and the data cannot be altered once the majority of entities in blockchain have validated it. To make it easier, everyone knows about Ethereum and Bitcoin, both of these are the most common a public platform.
As secure as this decentralized ledger sounds, there are several risks associated with public blockchain. Some of them are as followed;
From fake gold to dollar notes, money geeks know how to manipulate money and the same case happens with frauds committing double spending of digital currency. People use such tricks to exploit other’s assets to make personal financial gains. In simpler words, it is the risk that a digital currency can be used twice and a fake transaction copy can be given to the client.
This potential problem occurs with bitcoin as well, as it is also a public blockchain. By double spending, disparity occurs between the actual value of currency available versus the spending record.
51% Attack is similar to the “majority is authority” legacy. In this process, where the majority of miners or stake holders attack the blockchain to gain majority control over the proof of work (PoW). Proof of work has all the validated transactions listed on it. Miners and the auditors validate these transactions in the blockchain. After proofing when the transaction is validated, it becomes irreversible. But some miners who have greater and majority computer hacks and power can gain control and make all the past transaction reverted hence removing their existence. This can also cause double-spending. Bitcoin and Ethereum undergo 51% attack causing million dollars loss by malicious parties.
Proof of Stake Vulnerabilities
Proof of stake is another problem associated with public blockchain because it makes it vulnerable. The proof-of-stake (PoS) basically states that one’s ability to mine by validating block transactions is relative to the amount of stake they own in the network (cryptocurrency). Staking in digital currency means locking your digital assets into the chain of network and gaining profit in doing so. Proof-of-stake gives benefit nodes to validate the network based on the return on investment (ROI). In this process, you lock your digital asset, for example, ETH, and gain profit on this stake. One basically risks his digital asset on the incentive of making more money. For every public crypto blockchain, there is a required number of assets you need to put at stake to become a validator. For example, at least 32 Ethereum are needed to become ETH validator.