Recently, we’ve all seen news reports of disastrous instances where companies that started on Ethereum, fell victim to hacking attempts that left them penniless. If your safety is compromised, Ethereum and other emerging blockchain technology alike will be rendered mostly meaningless. How reliable is Ethereum, the newest decentralised, worldwide supercomputer, in light of such unsettling events? However, instances like these are only half the story. While utilising a decentralised software or trade that hasn’t been thoroughly authenticated might expose you and your ether to risk — Ethereum itself is far much safer than you would expect. Our article will guide you through the misconceptions that often get sensationalised — revealing the reality of the security that Ethereum provides. So, how safe is Ethereum exactly?
Ethereum or Smart Contracts: What Exactly Are You Asking About?
Questions about Ethereum’s safety and reliability are typically too vague to get an assured answer. Are you worried about the blockchain itself, the currency it supports, Ether (ETH), or the smart contracts built upon the platform — let’s figure it out!
Ethereum’s blockchain is fundamentally similar to a lot of other popular blockchains, particularly, Bitcoin. It’s a decentralised, worldwide software platform run by blockchain technology where new blocks are added to the publicly accessible log of transactions as computationally complex hurdles are solved by its mining collective. Although that differs from Bitcoin’s overall operation, the Ethereum system is built to work as a virtual computer that performs smart contracts that programmers may create in a Turing-complete programming language. Now, under this system, it’s easy to associate the failures of the smart contracts built for the platform with the failure of the platform itself. However, much like the analogy of blaming scam messages for making the totality of your mobile device unsafe, this is definitely not the case. Each of these components poses different and distinctive obstacles, and thus, we will proceed accordingly.
Are There Problems in the Blockchain?
As mentioned before, the compromised Ethereum security cases that have been sensationalised in the media recently, were typically not caused by a kink in the blockchain itself. These issues are largely related to smart contract technology, whereas the blockchain has shown beyond doubt its stability and reliability.
Cardano, Bitcoin, Solana, or otherwise, the fundamental premise and system behind a blockchain ensures that nobody can take over the entire network or add counterfeit blocks to the chain unless they own an overwhelming stock of the processing power. Ethereum’s miners are given financial rewards and benefits to behave within and represent the network’s utmost interests as opposed to attempting to harm or corrupt it, including freshly created ether for each successful block mine.
Furthermore, there are planned changes to turning the platform into a proof-of-stake system that could make Ethereum much more reliable. In the preceding proof-of-work framework, miners compete to solve computationally difficult challenges in order to add the subsequent block to the Ethereum chain. The magnitude of a node’s payout and gravity are both determined by the quantity of ETH it is staking. In the proposed new approach, validator nodes on the network alternate between presenting and verifying blocks.
How this actually translates is that one will need 51 per cent of the total processing power within a proof-of-work system in order to take it over. With the other, proof-of-stake system, one will need to own 51 percent of the committed ETH in order to dominate the entire system. Controlling and holding such a sum of ETH is far more difficult, as it takes more capital, than controlling the majority of the computational power. Now what this actually entails is that you will only need around 300 thousand dollars for an hour strike on Ethereum in a proof-of-work system, compared to needing at least a few million to billions worth of ETH just to control a micro-percentage of Ethereum as the current value of Ethereum is worth almost 40 billion. That being said, proof-of-stake is not always superior to proof-of-work, and many unanswered issues must be addressed in order to reach a conclusively state that it has decreased risk.
In order to create a block, these miners have to solve a cryptographic puzzle known as a hash. Once the correct number is solved, a block can be generated and added to the other chain of blocks generated by other miners. The result of creating this block is a reward for the user, most commonly in the form of the native crypto token of the network.
How About Smart Contracts?
A back-and-forth between customization and protection definitely exists when it comes to cryptocurrencies. The greater the flexibility and adaptability you provide programmers on your blockchain network, the higher the danger of hijacking you create. The customizability of Ethereum smart contracts provides a practical example of this particular tradeoff. Ethereum’s supported coding languages, most notably ‘Solidity’, were created with a focus on customizability. Ethereum gives developers the ability to create almost any type of DApp or token anyone can think of, in contrast to Bitcoin, whose supported coding language is purposefully restricted to provide a very specific utility of operating a virtual store platform and currency. This exact capability of Ethereum is to blame for a majority of security violations in recent years. Many experts in the field point out Solidity itself as the main source of susceptibility. To facilitate rapid trades, many users retain their assets of ETH and other cryptocurrencies directly on exchanges. However, exchanges may end up staking their users’ ETH to gradually create additional ETH if they don’t expressly implement and enforce policies that forbid them from doing so.
Much like the internet, Ethereum’s vulnerabilities and moments of disaster are related to decentralised applications with lax security.
Although the Ethereum network has generally been dependable, the smart contracts that are constructed atop the system are still in their infancy, and there will inevitably be additional security issues until the market is completely developed. Basically, cybersecurity technology and solutions need to catch up to the ever-growing sleuths of security risks. In such a situation, the significance of doing your homework before investing heaps into the ether network and using it in certain smart contracts, cannot be emphasised. Analyze the code carefully, read any and every credible article on the subject, listen to experts in the field, and find any and every bit of information. While this article is part of the existing dialogue, we should not be the only advice you seek — for guidance on making investments, consult a legally qualified specialist.