Chapter 6 – Risks and Challenges of Blockchain Technology

One of the major draws of blockchain technology is also one of its most significant challenges. Currently, there is very little regulation with regards to what is and isn't allowed in the blockchain space. Because of this, there have been numerous instances of hackers being able to make off with millions of dollars of investor money because of loopholes in the online blockchain systems. Despite the promise of security on the current blockchains, there are teething issues that hackers are taking advantage of to the detriment of every blockchain user.

Recently, there was a case with Enigma, a decentralized platform that was preparing to raise money through an ICO. Hackers were able to hack Enigma's website and numerous social accounts

successfully. This allowed the hackers to send out spam to Enigma's community and make off with almost $500,000. The Enigma project was launched by a group of MIT graduates, who sent out invites for people to join the Enigma community. The hackers grabbed money from those who joined the company's official mailing list and Slack group. In all, there were around 9,000 users and participants who were affected by this security breach.

The hacker's effectively posted messages on Slack altered the official website and spoofed emails to the community list to make it look like the company was making a formal request for money. Members of the community responded by sending money that was deposited directly into the hacker's crypto wallet.

Last year there was a similar hack but on a much larger scale. When the Decentralized Autonomous Organization or DAO that was built on Ethereum was hacked and resulted in a loss of $50 million to hackers.

The DAO was supposed to be a decentralized investment fund where decisions wouldn't rest on just a few partners, but rather anyone who invested in the fund would have a vote in which companies or projects the company should invest in. It was set up so that the more that you contributed, the more votes you got.

Since the fund was built to be distributed, no one could take the money and run. Unfortunately, due to human error and programming errors, hackers were able to exploit the system to receive a $50 million payday, which has of yet been recovered.

Another example of the challenges facing blockchain technology comes from a company called OneCoin. Recently, a company