The possibilities of cryptocurrency are still being worked out, in a fast-changing world where this new form of exchange is forever exploring potential new avenues as an asset, as well as increasingly offering an alternative to fiat money.
However, the possibilities, as with anything of value, will have been noted by more people than those keen to make an honest return from smart investment or clever trading.
Just as cyber criminals have sought to rob banks, steal customer data and hack their way into retailer databases, so they have also targeted cryptocurrency. Indeed, the largest crypto heist ever, the largest theft of any kind in history, took place this year when the notorious North Korean Lazarus Group got its hands on £1.1 billion of crypto from the ByBit exchange.
Coinbase hit By Heist
This was far from the only major crypto heist even this year. Coinbase has just been hit by a $400 million (CONV) heist after hackers paid outside contractors to provide them with customer information, enabling them to contact customers and trick them into transferring cryptocurrency over.
In addition, the hackers also gained some personal details of customers, although this did not include account numbers or passwords, Coinbase said.
While Coinbase has sacked all the contractors involved in the heist and will compensate those who lost out, this does raise considerable questions about security, not least when it is so easy to arrange an inside job by bribing staff.
It is bad timing for Coinbase and indeed the crypto sector, as the exchange revealed the news just days before being due to launch on the S&P 500 index, a landmark for a crypto firm.
Why XRP Is Safer
For these reasons, anyone with an XRPL card will be right to ask how solid the security in the system is. The good news is that the method used to keep XRP customers protected is quite exceptional.
Like other security systems, XRP uses Blockchain. Now, if anyone had said when Blockchain emerged a few years ago that this would be hacker-proof, some might have raised an eyebrow and said that was optimistic. So it has proven. This is why XRP Blockchain has an extra level of security through its ledger system.
While other systems, such as Bitcoin, have an energy-intensive proof-of-work algorithm, the ledger introduces a human element.
This requires a large number of people in very different places to work together in consensus, decentralising influence to the point where it is almost impossible for any would-be crook to try to gain control in the way that could work with 51 per cent control of an algorithm (which could re-write it for nefarious, crypto-thieving ends).
What happens is that the ledger has a large group of validators scattered around the globe who must independently agree to a transaction before it goes through. That means a consensus protocol must be satisfied before a transaction can pass.
This does not mean some committee coming together for a group discussion over tea and biscuits, however. Rather, each validator provides their verdict and if the consensus protocol is satisfied, the transaction proceeds. In practice, this enables things to happen very quickly when it is legitimate (3-5 seconds), and stops the whole thing in its tracks if it is not.
Why The Validators Can’t Be Bought Off
Following the Coinbase heist, it might be asked whether these validators could be bought off in the way those contractors were. The difficulty with this is that, in the first instance, the crooks would have to know who the validators were, information that is not accessible to the outside.
Indeed, while Ripple, which provides the default list of validators, can supply this to users, each user and developer can choose their own trusted list of validators, known as the Unique Nodes List. That means you keep control, only use the people you trust and any would-be hacker won’t know who is on your validator list.
Secondly, the system has a built-in fail-safe to protect against this specific possibility, known as Byzantine fault tolerance. This means the consensus protocol can work effectively even if up to 20 per cent of validators are malicious or faulty. This means the crooks would have to both identify who the validators are and manage to get over a fifth of them onside.
Finally, the validator list is a diverse one. Not only is it geographically spread out, but it includes personnel from universities, financial institutions and developers. Indeed, these are people who should be less open to corruption because they benefit from crypto security systems being credible, so they have a lot of skin in the game.
Put together, this system makes your XRP account one of the safest around.