Introduction To The Next-Gen Blockchain
For the last couple of years, technology corporates and enterprises have taken on the biggest challenge in the financial and banking industry of building an entirely new financial system which will be powered by both artificial intelligence (A.I.), blockchain technology and Data Science.
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The advantage of using the blockchain technology is a decentralized system which provides for a safe, encrypted and decentralized means of transacting directly and instantaneously with parties, without the need for intermediaries.
Large corporate giants like IBM, HP Enterprises, Walmart, and many more have already publicly announced their involvement and utilization with the development of the blockchain technology as they begin to integrate it into their core business models.
But, why these platforms seem to already have filled the tech space. The answer is that many of these platforms aren’t ready for real-world usage. There’s no question that the financial sector needs decentralization and scalability and security.
These are still very early days of blockchain technology, dubbed “first-generation.” The implementations of blockchain technology like the proof-of-work (PoW) and proof-of-stake (PoS) protocols, requires excessive computational power or mining required.
The technology behind blockchain must truly be decentralized, robust, secure, fast, scalable, and egalitarian. Smart contracts are still subject to human error and thus vulnerable to attack. Digital currencies, regardless of their purpose, must be backed by and pegged by real-world assets to sustain their value.
But these basic properties seem to be absent from the first gen blockchain applications. Most blockchain platforms, while advocating a decentralized system, are still developed towards centralization because of how PoW and PoS protocols work.
It’s really important to note that mining and stacking requires a huge computational power. With high computational power comes high electricity bills which are not affordable everyone.
For these reasons, platforms continue to lack scalability, allowing for smart contracts to be deemed vulnerable and cryptocurrency exchanges to remain open to cybersecurity attacks.
CYBERATTACK ON BINANCE
Binance suffered a large scale security breach late today, according to a statement. Hackers were able to obtain API keys, two-factor-authentication codes and other important authentication information. Moreover, 7,000 Bitcoin ($40 million) were withdrawn in a single transaction.
The hackers used multiple techniques, including phishing attacks and computer viruses to get at Binance and its hot wallets, where it keeps funds to manage the day-to-day operation of the exchange. The hackers were unable to access the Binance cold storage—the off-line wallets where the majority of funds are kept. Likewise, individual user wallets were not directly affected.
SMART CONTRACTS IN NEW-GEN BLOCKCHAIN SYSTEMS
With respect to smart contract technology, it’s important to understand that even if they are computer code, they are still subject to bugs, no matter how many precautions are taken. Why? Human error.
The new blockchain platform can tackle this issue. If a problem is discovered within a smart contract, the only person or entity affected should be and will be the entity that owns the account, nobody else.
If a problem is discovered surrounding a particular type of contract, the program template can be stopped from being linked to other account holders until the problem is fixed. Essentially, freezing everyone else out to prevent potential harm.