Blockchain technology is becoming very popular in today’s world. From small organizations to big ones all are moving towards it and are learning new ways to take advantage of Blockchain technology. They are seeing it as the eventual solution for real world problems.
It consist of many features that offers strong and promising functionality. As cited by various people on different occasions Blockchain technology is non- hackable and is most secure. Therefore, more and more people are looking forward to it.
Earlier Blockchain was considered as a myth but with its massive implementation in different fields things are changing. Not only the businesses are looking forward to it, but hackers too are determining ways to hack the Blockchain technology. In this article we are going to discuss such scenarios and how hackers can take exploit Blockchain technology for their personal gain.
Different cases that show Blockchain can be hacked
Here we list down different cases that show attacks that have been taken place on blockchain:
Case1: Recently a group of hackers dubbed, “51 Crew” have attacked blockchain clones Shift and Krypton. They performed this attack by overpowering a blockchain with hashing power and DDOS attack. After this attack hackers could take control on 51% of the network. This means if not completely blockchain can be hacked. The group is targeting smaller Ethereum blockchains. It may be a small attack but it is enough to prove that blockchain can be hacked.
Case 2: Second is the case where $ 65 million digital currency from Hong Kong-based exchange Bitfinx was stolen by hackers.
Case 3: This incident is the most critical of all the hacks. Ethereum’s first Decentralized Autonomous Organization (DAO) was attacked and huge amount was at lost. The attack was made possible after exploiting a loophole in the DAO’s smart contract.
This clearly states, humans make mistake and codes are written by humans so they cannot be 100% secure from any attack.
All these activities make us doubt security and safety of Blockchain technology.
See Also: How Can Blockchain Prevent Click Frauds?
To understand things better, we need to first understand why Blockchain technology is claimed as “secure”. Each block in the blockchain stores a Secure Hash Encryption (SHA) and is linked to the earlier block. Thus, creating countless blocks that contains thousands of transactions connected to a blockchain.
To understand it better you can refer to the diagram below:
All the blocks linked in Blockchain are mostly based on Proof of Work, where each transaction is verified using a private key. If a change is made to any block in the chain, the hash also gets altered thus allowing the individuals in the network to trace an altered block. Once such a block is identified it is excluded by the network, thus lessening the chance of being exploited by a hacker.
With such a strong system we can surely say Blockchain is secure. But looking at the cases mentioned above a question arises, how can such a network be hacked? What can we do to secure it?
To get answers of all such questions you need to read further and understand how Blockchain hacking is implemented? Most commonly Blockchain hacking takes place in three ways, below we discuss them in detail:
Theft of Private Key
This is the straightest and most easy method of getting into a Blockchain network. Every user who is part of the Blockchain network is assigned with a private key. This key is used to sign transactions, and then they are further verified using a public key. If a hacker gets access to a private key he can easy steal all the digital currency associated with the private key. To steal the currency burglar needs to have the private key and sign a transaction using that key. Once that is done he can easily transfer all the digital currency to his address, without creating any suspicion within the people connected on the network.
To deal with this problem many Blockchain wallets are bringing new security features. These features will protect a user’s private key, and will allow user to access the key on multiple devices, including cloud based. They even distribute more public keys for signing purpose and broadcast each transaction to peer-to-peer network.
Hacking Computing Power
As explained most Blockchains are based on “Proof of work” algorithm, used to authorize each transaction. Each time a transaction is verified a new block is added to the chain with transaction details. To authorize all these transactions a major amount of computing power is used.
So, imagine if a hacker can get his hands on to these machines, he can divert the computing power to his account and can then control large chunks of data on the network. Generally, blockchain transfer is acknowledged and is considered genuine if more than 50% of network participants agree to it. So, what the hacker does is once he diverts the computing power he, creates longer chains than authentication chains, owing to dual transactions. Thus, making it hard to detect what is going on.
How To deal with this problem? – “proof of stake” consensus should be used. Already many platforms have started to use it, as it is a different way of validating transactions. This means even if the computing power is hacked, the members on the network can rectify the transaction based on the stake they have in the network. Obviously, this is a better way as no individuals who have invested in a digital currency will want that any fake transaction is processed.
Decentralized Autonomous Organization (DAO) attack clearly explains humans make mistakes, and as software is made by them it will surely have loopholes that can be exploited by other humans. Then how can we think Blockchain is secure or is un-hackable. It too has vulnerabilities and over the years many of them have been discovered. Therefore, we cannot guarantee that it is completely secure and there are no more susceptibilities. Many organizations use Blockchain technology as their base to create other platforms like Ethereum and they further customize thus making it more vulnerable. Ethereum Blockchain provides flexibility to the developers to write their own codes, smart contracts, thus opening gates for more hacks and probable bugs.
Also, the creation of ICO’s after Dec 2017 clearly shows mindset of companies on how they want to earn huge profits by fooling users.
This clearly shows there’s always a chance of network being hacked, even if you take all the precautions.
To deal with this problem, testing process and software development needs to be stronger and error free. Attention needs to be paid to penetrating and functional testing.
There is one area in Blockchain that needs special attention i.e. external system integration. As, blockchain systems are built on external systems there is a risk involved, anytime hackers can use these systems to weaken the links. Most blockchains are developed on “oracles”, i.e. receiving data from outside blockchain, these are trusted agents but relying on such agents makes system susceptible to threats and creates doubts about system reliability and security.
How to Handle Blockchain Hacking?
After knowing that Blockchain is hackable you must now be looking for ways, strategies to deal with these threats. So, here we bring for you some ways to handle Blockchain hacking attacks:
Despite taking all the necessary precautions, a network can be hacked. The DAO attack clearly shows human error is the biggest cause of all these attacks. But it even tells a way to handle these hacks. This can be done by doing hard fork of network and by having individuals who are part of network to rectify the fork instead of long chain prevailing.
Overall, blockchain technology robust and is based on security principles, but to make it sturdier one needs to know the software defects, and fix all the loopholes. Once this is done we can rely more on this amazing technology. With implementation of blockchain in almost all the fields law enforcement needs to change its guidelines and handle security breaches firmly. But this doesn’t mean organizations and developers should avoid using new technology. They should use it as there are many benefits and as every coin has two sides same is with blockchain. We just need to be more careful with the things as with every modern technology there are new challenges that we need to face.