Many cybersecurity and financial experts have hailed blockchain technology as the solution to increase the efficiency of the transfers and purchases on the web, but it is the security that has been the big deal. Blockchain technology was expected to be the way that systems would be protected across multiple networks, removing the concern of hackers breaching the systems. Sadly, that faith looks to be misplaced as it has now been discovered that bots are finding ways to exploit these blockchains, opening the door predatory practices.
According a report, inefficiencies in these decentralized exchanges have been found by these bots. This is enabling predatory users to be able to make a profit off of trades by “siphoning millions or possibly billions of dollars a year in cryptocurrency.”
In this system, the place of the broker is replaced by the blockchain technology. This makes many believe that their transaction can be trusted because of the technology employed, but it has been discovered that these transactions can be manipulated.
While this may be news to some, there have been concerns about this technology already. Researchers at Cornell expressed concerns that there were too many of these trading bots already “running” the cryptocurrency trade, which they expressed concern related to the opportunity for fraud that could occur.
One of the primary concerns is how the bots are manipulating the trading platforms. According to the Department of Homeland Security, these bots have been able to manipulate trading networks and platforms so that they give higher priority to certain transactions. This allows for increased fees to be levied, earning the owners of these bots more money.
These bots have also been taking advantage of the delays that occur on these trading platforms. This allows them to make trades ahead of normal transactions, often allowing them to circumvent a trade that has not processed, acquiring the currency fraudulently.
This has led to a series of warnings, looking to ensure that those involved in cryptocurrency trades and accounts to be cautious. “In these systems, the broker is replaced by the blockchain, which seems like a trusted third party, but in reality, there are a lot of different moving parts in the blockchain that can be manipulated,” explained Cornell Tech computer science doctoral student Philip Daian. “So, you have to be very careful about what the blockchain is actually giving you.”
Successful cryptocurrency miners are driving many of these problems. Because they have gained so much power, they are able to prioritize their trades or mining operations ahead of others using these bots. This is making the whole system vulnerable, while also removing the feeling that many have believed that cryptocurrency mining is somehow fair to all involved.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.
