The very design features that make Bitcoin technology appealing to its users are also weaknesses being exploited for the theft of the cryptocurrency – new research reveals.
The blockchain technology on which Bitcoin is based is decentralised, pseudo-anonymous and unregulated and therefore attractive to many of its users. It offers alternatives to, what many users consider to be, key weaknesses of traditional models – where banks act as trusted third parties to mediate financial transactions.
Traditional bank transactions can incur high fees, can be slow, and transactions can also be approved or reversed by banks even if contrary to a contract between the trading parties. In comparison, due to its open ledger design, blockchain is transparent, fast, cost-effective, and also intentionally provides irreversible transactions.
These transparent design features are supposed to promote trust in Bitcoin. However, computer scientists at Lancaster University and Universiti Teknologi MARA (Malaysia) show that these features are presenting opportunities for fraud– undermining trust in the currency.