The Pentagon: “Blockchain isn’t decentralized, is vulnerable and outdated”

Category: Americas Blockchain Regulatory

A new report by the United States’ highest authority on defense and security, The Pentagon, is intensely critical on the emerging technology. The main criticisms include issues of centralization, outdated software and vulnerability to attacks.

The difficulties of Decentralization

The report “Are Blockchains Decentralised, Unintended Centralities in Distributed Ledgers”, has galvanized debate on Blockchain’s role in a number of industries with fintech, security, big tech being amongst the forefront of this growing concern. Possibly the most harsh finding of the report was that a number of actors within a supposedly decentralized Blockchain’s ecosystem are able to

“exert excessive and centralize control over the entire blockchain system.”

The Defense Advanced Research Projects Agency (DARPA), the Pentagon’s research arm, contacted Trail of Bits to investigate Blockchains such as Bitcoin and Ethereum during the course of this aforementioned study. The security research organization found that only four entities in Bitcoin and two entities in Ethereum are required to disrupt their respective ecosystems. Moreover, 60% of all Bitcoin traffic moves through only three ISPs with the organization making note of outdated and unencrypted software and protocols in use.

The Trail of Bits report stated that “the safety of a blockchain depends on the security of the software and protocols of its off-chain governance or consensus mechanisms.” The researchers also studied third-parties vital to their respective ecosystems such as mining pool sites with shocking results.

“ViaBTC, a leading global mining pool, assigns the password “123” to its accounts. Pooling, another mining organization, does not even validate credentials at all, and Slushpool—which has mined more than 1.2 million Bitcoin since 2010—instructs users to ignore the password field. Combined, these three mining pools account for about 25% of the Bitcoin hash rate, or total computer power.”

“Decentralized” Blockchain: Harsh criticism or valid points?

The report also noted some inherent issues in the decentralized superstructure of Blockchains such as Bitcoin with the concluding statements noting that

“The majority of Bitcoin nodes have significant incentives to behave dishonestly, and in fact, there is no known way to create any permission-less blockchain that is impervious to malicious nodes without having a TTP.”

This critique comes at a vital time in the evolution of the ecosystem. On one hand, the rise of Crypto Winter brought forth by the collapse of Terra-Luna and the Celsius Network have placed the nascent industry under unprecedented amounts of pressure and criticism. On the other, some of the largest institutional investors, respected advisory firms, Venture Capital groups and Big Tech giants are delving headfirst into the industry and its related aspects such as the Metaverse. With concerns on how genuine “decentralization” might be easier said than done, only time will tell how this report will effect the industry down the line.

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Budapest, Hungary event


Budapest, Hungary

02 - 04 September 2024