Apparently, criminals rob banks merely because that’s where the money is – it’s a no-brainer, right?
Over a decade now, Blockchain technology has garnered massive attention because it’s deemed to be secure. It’s this attention that has attracted folks looking to steal money through hacking the system.
But is it even hackable?
Simply put, once hailed as unhackable, unfortunately, blockchains are now getting hacked.
Are you surprised? Of course, you should be!
However, before diving into how blockchain can be hacked, what’s the blockchain itself?
In this era, several organizations, even those in the legal industry are using blockchain for various business functions. Ideally, blockchain allows the user to record all transactions across a distributed network of computers.
What makes it interesting is the fact that the server is absolutely secure and transactions permanent, making verification easier. Also, transactions are made directly between users without a third-party facilitator. A blockchain protocol is in place instructing computers on verification as well as adding transactions. Furthermore, the blockchain keeps a history of the transactions and a user can’t alter the data.
So, if that’s the case, how can it then be hacked?
The 51% Rule
Before we go further, let’s set something straight.
Most investors tend to confuse blockchain hacks with digital exchange hacks. Whereas centralized digital exchanges are hacked often than they should, hacks on the decentralized blockchain are rare – they’re a little hard to achieve with little incentive for the attack.
Now, the most ideal situation that hackers use on the blockchain is the 51% attack. During the verification process, people known as “miners” review all the transactions to make sure that they are genuine. Therefore, once a hacker or more gains control of more than half of the mining process, the consequences can be vital.
For instance, miners can come up with another version of the blockchain, known as a fork, whereby some of the transactions are never reflected. That way, the miners can easily create a totally different group of transactions (on the fork) and make it look like the true blockchain version, even when it’s fraudulent.
Therefore, it makes it easy now for hackers to spend double cryptocurrency. Perhaps, such 51% attacks are common on the small scale blockchains; the reason being, it’s difficult to gain significant control on the larger as well as more complex blockchains.
There’s another situation in which a blockchain can be hacked.
Sometimes, there can be security errors or glitches when creating blockchain; it’s a common scenario with larger and more intricate blockchains. Therefore, when such a scenario occurs, hackers that are on the lookout for an opportunity to sneak in can easily identify vulnerabilities and then can make their move.
It’s a common occurrence with smart contracts that use blockchain networks for their operation. Smart contracts function in that they assist on the financial aspect of the contract dealings as well as automating tasks.
Some legal professions might encounter smart contracts either use them internally or via exposure from the cases as well client issues.
The point here is that if there’s a security flaw on the blockchain network where the smart contract is in operation, that could be the perfect route for hackers to siphon some money from users undetected as the fraudulent activity does not reflect.
Given the fact that blockchain transactions can’t be altered, there’s only one way to get stolen money back; making a fork that every user recognizes as entirely the authoritative blockchain.
What next for Blockchain?
Hackers seem to be everywhere, can they even be defeated?
Several startups have been created to ensure that they address the blockchain hacking threat, including AnChain.ai that uses artificial intelligence to monitor all the transactions as well as to detect any suspicious activity. Moreover, it can scan smart contract codes for any known vulnerabilities.
The future to deal with blockchain hacks could be in the Proof Of Stake, whereby several independent nodes are allowed and any participant with the protocol’s native currency is able to “stake” it and then easily participate in processing the transactions.
Another option could be Proof Of History, whereby chain orders, as well as transactions, are verified. As much as the model has not established a strong foundation, it does offer a new perspective as well as an excellent possibility.
Nevertheless, thus far, nobody has single-handedly taken down a blockchain. The most reported cases have involved a collection of malicious actors or even the core development team collaborating to breach the security of a blockchain.
However, as the blockchain platforms are getting stronger via the increase of stakers or nodes, hacking decentralized networks is nearing zero. Furthermore, the new blockchain systems are using academically proven techniques that ideally would require specialized quantum computers for one to hack.
Therefore, going forward, individuals that encounter blockchain should be apprised of risks as well as the new solutions. Besides, before trading on an exchange, or using smart contracts, one should research for any previous attacks or relevant security measures.
In conclusion, at this point, blockchain users have nothing to be too apprehensive about as the technology appears to be very secure. Besides, efforts are already in place to ensure that blockchain indeed becomes unhackable.
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