3 Blockchain Vulnerabilities That You Need To Know
Blockchain is often described as an innovative technology that can solve many issues that exist in our current global financial system, but scams, hacks, and crime have plagued the web3 community since its inception with numerous issues that are slowly being resolved by regulations from government bodies such as the United States.
However, there are still some major technical issues that do exist and it is important to take a closer look at vulnerabilities that exist within blockchain so that developers and users alike can learn to identify them when they occur and how to mitigate risk and exposure in those scenarios.
Examples of blockchain vulnerabilities
Examining blockchain security, there are a number of issues that malicious actors and hackers pose which are not inherent to blockchain technology itself.
51% Attack
A 51% attack is a situation where a hacker is able to take over a network by controlling a majority of the network’s computing power known as a hashrate. In the event that this happens, a hacker would then be able to take control of the blockchain’s history, allowing them to change transactions which would create extreme issues on any network.
In order to prevent this from happening, blockchain networks need to continue expanding their networks with additional nodes so that achieving a 51% majority of the network becomes highly improbable due to the sheer amount of computing required.
Double Spend Attack
A double spend attack is a situation in which a hacker is able to initiate two separate transactions using the same coins. This can help a hacker acquire certain losses and gains in a way that abuses the blockchain and puts the financial assets of other users in jeopardy.
To prevent this from occurring, robust consensus mechanisms are needed to validate every transaction correctly. Some networks take this a step further by penalizing any node that allows incorrect transactions to complete.
Sybil Attack
A Sybil attack is when an individual or group of bad actors attempt to disrupt a network by creating multiple fake identities (or private keys). This can cause the network traffic to become clogged, giving attackers opportunities to initiate even worse attacks.
Sybil attacks, unfortunately, are one of the more difficult events to prevent for developers because there is no way that users can be limited to the number of private keys they can create on-chain. This means that developers need to create frameworks that can help identify potential Sybil attacks through reputation systems and identity verification.
Real-World Examples of Blockchain Vulnerabilities
While attacks like these are rare and difficult to execute correctly on many large blockchains, they have happened in the past and are important for investors to be aware of as they pose massive threats.
In 2020, CoinDesk reported that the Ethereum Classic blockchain had been hit with a third 51% attack, causing the network to receive serious setbacks. The existence of Ethereum Classic was already a sensitive subject within the Ethereum community following TheDao’s major hack which forced the blockchain to fork into the contemporary version we see today.
Bitcoin Gold was also hit with a 51% attack in 2020 that led to a major double-spend attack, causing attackers to run away with over $70,000 worth of BTG. The cryptocurrency had experienced similar issues in 2018 when another double-spend attack occurred and caused the network to lose even larger amounts. Due to this, Binance was forced to increase the amount necessary to withdraw BTG from their exchange because of its high risk.
Prevention and Mitigation Measures
While these attacks pose major risks to a network, there are still steps that can be taken to mitigate their impact and even prevent them from happening. The first, and most obvious, example of security is through consensus mechanisms which were designed to offer validity and proof of the value created on-chain.
Cryptography is another practice that can be used to create additional precautions for users. By incorporating cryptographic signatures into each transaction, double spending attacks can be avoided because of new technical features that are necessary for transactions to be successfully executed, meaning that it is harder to automate the creation of new wallets meant to disrupt the network.
Developers can also practice good safety techniques with regular monitoring of the network to identify any suspicious activity that might be occurring on-chain. They can also prevent these attacks through consistent updates to the protocols that address known issues.
