While Blockchain certainly holds exciting potential, it’s also a relatively new technology which creates room for some inherent risks. Before implementing an appropriate Blockchain solution, it’s essential to understand the key practical Blockchain risk factors and how to minimise your exposure.
Types of Blockchain Risk
Deloitte breaks Blockchain risks into three primary categories:
1) Standard Risk
Standard risks are similar to the risks already encountered within your organisation as part of your current business processes. Blockchain, as a different, more sophisticated technology, slightly alters these risks and it is important to bear these changes in mind during implementation.
2) Value Transfer Risks
Blockchain exists outside of any centralised governing body by allowing peer-to-peer value transfers. Decentralisation gives rise to new risks and vulnerabilities, which were previously managed by the central governing body.
3) Smart Contract Risks
Smart contracts represent one of the most exciting and promises use of Blockchain. However, transferring or one-to-one mapping physical contracts to the digital landscape could bring about new risks.
Some of the Key Risks of Blockchain
Within the three types of Blockchain risk categories, there are some specific system weaknesses to keep in mind throughout the implementation process.
Inefficient consensus mechanisms
As a decentralised technology, Blockchain technology relies on consensus mechanisms to verify transactions. Some experts claim that the commonly used Proof of Work consensus mechanism is rather inefficient. These experts call for a more advanced and efficient consensus mechanism that combines Proof of Work and Proof of Stake.
The 51% attack
While the 51% attack primarily refers to POW-based Blockchains, Blockchain depends on mutual trust. If a miner or group of miners control more than 50% of the network’s mining hash rate or computing power, they seize control of the Blockchain initiating a 51% attack.
A 51% attack allows the controlling miners to prevent other users from adding new transactions to the chain and freezes transactions between users. While in control of the Blockchain, the controlling miners can also reverse transactions and double-spend coins.
How to Mitigate Blockchain Risks
We truly believe that the potential of Blockchain outweighs the risks and using the following methods can reduce your vulnerability.
Open Enterprise Software allows enterprises to run open-source software along with their legacy and critical applications. Open-source software is re-distributed by trusted partners that guarantee their uptime, integrations, automation and interoperability between systems.
Trusted version distribution
Open-source providers can also host copies of images and repositories in a trusted architecture that interoperates with your current architecture set-up. Data backups via a trusted architecture are handled by on-premises Docker registries or via the BaaS Ocyan platform.
Faster reseal cycles
With the right operating Blockchain software distribution partner or provider, ad-hoc patches can be done and deployed on case-by-case scenarios. This approach gives you complete control of your uptime and release cycle.
On-prem or BaaS Options
Blockchain solutions are typically available as either Accessible Cloud service (GA) or On-Premise automation. These solutions provide the same SLA but inherit the firewall and security rules of the organisation.
This mitigates the risk of vendor lock-in as you can use any platform. If your provider is a cloud and protocol agnostic, you can also set-up a hybrid infrastructure or execute complicated platform migrations.
Your Blockchain provider should handle the SLA, quality, automation support and maintenance. They should also provide analytics ingestion and ensure the stability of your installed software.
To maintain end-to-end stability, the provider’s server hosts the “verified” versions of Docker images to guarantee a smooth runtime. You can take advantage of fixed versioning for releases, which increases your control and gives you the option to install versions directly from the community hubs.
Blockchain Integrations, Analytics, Monitoring and Alerts
Blockchain operations must be compatible with your enterprise’s existing digital operations. You also need to choose a solution that delivers detailed transaction monitoring and informative analysis.
Therefore, you need to consider selecting a Blockchain Analytics Platform that provides a single source of truth for customers’ Blockchain data. Along with continuous full-stack monitoring and custom-defined alerts, customers can programmatically define alerts to trigger incident reports or programmatic trigger events.
Infrastructure, Automation and Cloud Native
The best Blockchain providers offer a serverless (on-prem cloud-managed) platform, which allows you to connect to any blockchain network as well as create models of and analyse Blockchain-based traffic. The serverless platform also creates correlations based on your company’s dataset, for example connecting identities to wallets, and integrates the connected networks to cloud-based enterprise services.
The Future of Blockchain
We’re currently experiencing a technological revolution that’ll allow enterprises to bypass previous boundaries and discover new horizons.
Blockchain-based solutions are quickly becoming more advanced and are already disrupting many industries like energy, finance, logistics, mobility, healthcare, pharma, etc.
Ten to fifteen years ago, we couldn’t imagine the concept of e-governments or data user-centric concepts (e.g. GDPR). Now, we can’t imagine a world without access to automation and the Internet.
P2P technologies are the next step in the digital revolution as they’ll move us towards a more decentralised state and give users more control. To continue our digital evolution, we’ll need a bridging solution to take new concepts from a plan to action, concept to execution, or idea to ideal.
Platform providers of the future will connect the dots and help companies to automate their enterprise environments. All companies need to embrace these changes to future-proof their business and operating models.
Discover the Ultimate Blockchain Solution at Ocyan
Here at Ocyan, we’re powering enterprises with multi-cloud Blockchain infrastructure. Send us a message to find out more about end-to-end cloud-operating solutions for enterprise Blockchain and P2P networks.