Blockchain has shown its ability regarding validation processes that need scalability and transparency, according to Cointelegraph. With the technology facing a range of adoption based issues, here are some mentioned challenges:
51% attacks- On the basis of security, decentralised blockchains are more prone to 51% attacks than the centralised ones. As a result, cryptocurrency investors have raised concerns about their assets kept on decentralised chains. 51% attacks function through their exploitation of a loophole in decentralised systems that allow users to control a chain by wielding over 51% of the processing power, and it happens on networks using proof-of-work (PoW) standard. Permisionless blockchain systems with low rates are susceptible to these kinds of attacks. Cryptocurrencies such as Bitcoin Cash ABC (BCHA), Bitcoin Cash (BCH), and Ethereum classic have been at the receiving end of these attacks.
Flash loan attacks- Flash loan attacks target smart contract decentralised finance (DeFi) ecosystems, as they offer non-collaterised loans. Attackers can make use of arbitrage loopholes to manipulate token value and withdraw profits to other networks, to launder money. For example, the PancakeBunny hack attack, in May 2021, led to the loss of approximately $200 million in cryptocurrency assets.
Coding loopholes- Blockchain networks get targetted by coding loopholes, as entities which hold blockchain keys are vulnerable. With gain of access to blockchain keys, hackers can transfer assets from wallets that are native to the system.
Centralisation of information- Problem with blockchain arises due to the centralisation of information because of blockchains’ reliance on external sources. Certain networks use oracle systems to determine pricing on their ecosystems which has led to losses in some cases. Some of the other problems faced by centralised blockchain systems include susceptibility to rug pulls, which are manipulative maneuvers to publicise projects to draw investors. These issues happen in cryptoverse due to lack of regulatory oversight, which have caused issues such as tax evasion and money laundering.
(With insights from Cointelegraph)