TD₿: Trusted Third Parties are Security Holes by Nick Szabo
TL;DR In the real world, a security problem does not disappear because a designer assumes it away.
Hey Bitcoiners,
August has already gotten off to a hot start in “crypto” land. In a matter of days, two major hacks have resulted in millions of dollars stolen.
1.) The bridge protocol Nomad was hacked to the tune of $190 million when an upgrade allowed bad actors to skip verification messages.
2.) An ongoing hack on Solana has impacted nearly 8,000 wallets and stolen over $5 million dollars *so far* across multiple tokens built on the platform.
First off, my heart goes out to any victims of these hacks who perhaps were fooled by the false marketing pushed by these centralized teams. As difficult as this is, I hope you take this as a learning experience to bolster your own security practices and better understand the differences between secure blockchains like Bitcoin and everything else.
Secondly, I would like to turn your attention to Solana’s website, where they still market themselves as decentralized (false), censorship-resistant (false), and secure (clearly false).
Furthermore, they report that Solana will be “low cost, forever.”
Of course, the true cost of using an insecure network like Solana is you may wake up one morning to find your entire wallet balance drained due to some exploit, just as people are finding out today.
This is something that seems to go over the heads of a lot of “crypto” VCs out there who are obsessed with speed and functionality. See exhibit A below 👇
It doesn’t matter how fast a centralized blockchain’s transactions are or how many applications are built on it; if it isn’t secure, all those things simply do not matter.
In the case of Solana, they used disingenuous marketing tactics to paint a picture that they were decentralized and secure. In reality, the centralized team behind the project has unilaterally halted the blockchain on multiple occasions this year. They represent a single point of failure for the protocol. Solana should therefore be thought of as a trusted third party rather than a decentralized blockchain protocol.
Nick Szabo wrote this piece a long time ago on why trusted third parties are security holes. (01/01/2001).
The Bitcoin protocol prioritized security and decentralization above everything else because the original developers knew that if it didn’t have those traits, the protocol would be doomed to fail.
Security is something that doesn’t grab a lot of headlines. It won't elicit the same excitement as the promises of fast transactions, smart contracts, or NFTs. It is something one usually only appreciates when they need it or when it’s already too late.
Bitcoin continues to be the most secure blockchain by a long shot, which is why Bitcoin investors can sleep easy at night knowing their wealth is stored in something that has never been hacked in its entire history.
Tick tock next block,
Cory Klippsten
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Quote of the Day
“Choosing to build on a blockchain other than Bitcoin is a sign that security and censorship-resistance are not high priorities.” - Stephen Cole, Venture Partner at Trammell Venture Partners and Angel Investor
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Event of the Day
Tonight — RSVP for a special night brought to you by AZ Bitcoin Network from 6:00-8:00 pm where Trammell Venture Partners’s Stephen Cole will be giving a talk on “Bitcoin: what it is, why it matters, and how it can change the world.”
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Meme of the Day