Blockchain, also known as Distributed Ledger Technology (DLT), is used for preserving the history and integrity of digital assets through the use of cryptographic hashing and decentralization techniques. The decentralization of the transactions makes them transparent and hard to alter.
But what exactly is the blockchain and can it actually be hacked? What is its relationship with the Bitcoin Network?
What Is the Blockchain?
In a blockchain, the digital data is stored in a block of several cryptographic databases or “chains” that are interconnected through peer-to-peer nodes.
Each block carries a number of transactions and whenever a new transaction takes place on the blockchain, a record of that is added to every participant’s ledger. Essentially, each database stores a copy of the most up-to-date version of data.
The main premise behind blockchain technology is the promise that, instead of depending on a third party to manage digital data, users control and manage it themselves.
Blockchain Technology and the Bitcoin Network
Whenever we talk about blockchain, it always leads to talk of Bitcoin. That’s because blockchain technology is a foundation for cryptocurrencies like Bitcoin.
A Bitcoin is a decentralized, public ledger with no third party controlling it. Any Bitcoin owner can participate in this network, and send and receive Bitcoin as well as hold a copy of the ledger if they want to.
To say that a Bitcoin ledger is transparent would not be an understatement. As such, the Bitcoin industry relies on blockchain technology for safe and secure exchanges and for keeping the end users’ digital wallets safe.
With all this data transparency, is it even possible to hack the blockchain?
Can Blockchain Be Hacked?
Once touted as unhackable due to its non-altering characteristics, the blockchain has recently started becoming a target of hack attacks as well.
Most people think of a hack attack as exposing private information to the public but this does not apply in the context of blockchain: it’s already public and decentralized. Blockchain transactions are posted to a public database that anyone can review, making it more secure as everyone must agree before changes are made.
It is this lack of privacy that is considered a benefit but also poses a big concern for privacy reasons. Unfortunately, some recent attacks like the 51 percent attack, Sybil attack, and Timejacking have proven that blockchain technology is a target for hackers.
How Do Hackers Attack the Blockchain?
Blockchain attacks can happen in a number of ways. Sometimes it’s through simple errors and at other times it’s the evasive techniques used by hackers.
Here are some common attack vectors for the blockchain:
Creation Errors
If there are security glitches or mistakes during the creation of the blockchain then it can lead to potential hacks. The larger and more intricate a blockchain is, the more vulnerable it is to hack attacks.
The organization that runs Zcash—a cryptocurrency that lets users carry out private transactions by employing extremely complicated math—revealed that they had discovered and fixed a slight cryptographic flaw. If Zcash had not been able to patch it, a threat actor could have exploited it by carrying out an attack.
Weak Security Practices
Weak security practices around exchanges can offer hackers a chance to infiltrate the blockchain. In fact, most blockchain hacks have happened on exchanges as it is the main platform for users to trade cryptocurrency.
If the security practices surrounding the exchanges are weak, hackers will get easy access to the data.
Denial-of-Service (DoS) Attacks
Blockchain is built to sustain DoS attacks but if each node in the blockchain network is individually targeted by DoS attacks, it can certainly have an impact on the overall security of a blockchain.
Transaction-Based Injection Attacks
By taking advantage of poor input sanitization, injection attacks exploit weaknesses in a blockchain by using malformed and malicious input.
If a vulnerability exists in the blockchain’s software transaction or block, it can compromise all of the nodes running that specific version of the blockchain software.
The 51 Percent Attack
#Bitcoin is facing a number of challenges.
These include speed of transaction verification, a lack of privacy, high fees and risk of a 51% attack.
However there are solutions currently being worked on to fix Bitcoin's bottlenecks.
— CB-Fastpay (@coinberry01) May 23, 2021
This is the most common type of attack where a situation is created that lets the hackers control more than 51 percent of the computing or hashing power within a blockchain network.
In 2020, the Ethereum Classic (ETC) network suffered three major 51 percent attacks. The first attack resulted in the loss of approximately $ 5.6 million.
During normal cryptocurrency transactions, all “miners” or users review transactions to ensure their integrity. However, if a hacker gains control over half of the transaction process, then it can wreak havoc on the blockchain.
The hackers can create a second version of the blockchain, or a “fork”, where certain transactions are hidden and tampered with and later presented as the true version of the blockchain when in fact they are fraudulent.
Typosquatting
Typosquatting normally involves the creation of fake websites that allow threat actors to collect user data and access their personal accounts. Individuals may be tricked into entering a website disguised as a crypto exchange.
Once the users enter their credentials, they unknowingly hand access to the hacker who now has total control over their cryptocurrency wallets.
Phishing Attacks
Phishing attacks are generally carried out by tricking victims into clicking on malicious links and sharing their personal data. Phishing is the most popular hacking technique where emails and messages are disguised as coming from legitimate sources.
Most phishing attacks are carried out through emails.
Sybil Attacks
Similar to the DoS attacks, Sybil attacks take place when the majority of the nodes are controlled by one entity but are full of multiple requests coming from forged identities.
The multiple forged identities prevent legitimate requests from coming through, causing a system crash.
Never Take Security for Granted
According to public data since 2017, hackers have stolen about $ 2 billion in blockchain cryptocurrency. These events prove that the blockchain can be tampered with.
Fortunately, most blockchain attacks are carried out by individual hackers and the complicated technology behind blockchain makes it very hard to infiltrate.
However, end-users should always practice caution before conducting cryptocurrency-related transactions and make informed decisions by researching any previous attacks on the blockchain. After all, a single vulnerability is all a hacker needs to infiltrate the blockchain—or any other network for that matter.
