Five Common Blockchain Hacks- Coinpedia

While initially, blockchains were considered “unhackable” by many, this is not the case today! Blockchains can be targeted in a variety of evolved manners. In some ways, the security of blockchains is compromised by users not following the best security practices. It is crucial to note that the technology itself is generally secure. However, the vulnerabilities might arise due to the way it is implemented, used, or interacted with. To minimize these risks, awareness plays a dominant role. Let us know about the five main blockchain hacks that we usually witness in the world of crypto.

1. Blockchain hacks: What are they?

Blockchain hacks happen when malicious elements find ways to steal or take away digital assets like cryptocurrencies from blockchain systems. This can be achieved by exploiting the weak points in the technology, smart contracts,or through ignorant user activities. The hacks could lead to supreme financial losses and disrupt the basic functioning of the blockchains. It is a user’s paramount duty to follow safety practices while working around wallets, exchanges, or blockchains.

2. 51% Attack

A 51% attack is like a group of people controlling more than half of an entity. In the crypto world, it means they have more than 50% of the computing power in a specific network. With this kind of power, they can manipulate transactions, double-spend coins, or destroy the system’s trustworthiness. To protect oneself from such mishaps the following simple points should be incorporated: 

• Always choose secure currencies that are well-established and have a strong decentralized network. For example, Bitcoin or Ethereum
• Work with reputable exchanges that have all the safety measures in place.
• Wait for the final confirmation when you receive any crypto payment. This reduces the risk of a double-spending attack.
• It is better to diversify the holdings instead of pulling all the funds into one currency. It can easily deviate the impact of a 51% attack on any single asset.
• Choose the mining pools that work with decentralization. The funds should not be concentrated into one pool, allowing too much power in a single place.

3. Smart Contract Vulnerabilities

Suppose there is a hole or a weak spot in the computer program that can be exploited, similarly, a vulnerability can occur in the smart contracts in the blockchain world. Smart contracts are like self-executing agreements that bind the users into a contract. If there’s a glitch in a smart contract’s code, it can be misused by anyone to his advantage. This could lead to financial losses or unexpected manipulations. It is very important for the developers to carefully review and test the functioning of the smart contracts to keep the whole system secure.

• It is advised to have experienced developers thoroughly review the smart contract code to check for loopholes. 
• Consider tools like automated code analysers to find the problematic spots.
• Always test the smart contracts before including them in the network. Use test networks or sandboxes for the analysis.
• Use well-established libraries and contracts that have already been checked by the community.
• Follow best of the security practices for coding and error handling.
• Keep these contracts as simple as possible to avoid any complexity.
• Always keep up with the latest developments in blockchain security to adhere to the best safety practices.

4. Phishing and Social Engineering

Scammers use phishing and social engineering as common ways to trick users into revealing their private information. Here is how they work:

• Attackers make fake websites that might appear to be authentic. Users are lured into providing their private details, which are stolen by the attackers later.
• Fake ICOs can be created through social engineering methods, convincing users to invest in fraudulent projects. 
• Email scams are very common these days, where phishers send convincing emails that appear to be from authentic senders. They contain links to fake login pages, willing to steal the login details.

To protect oneself from such scams, some measures should be strictly followed:

• Always double-check the URLs before clicking on them.
• Store the currency in hardware wallets that are not connected to the internet.
• Beware of unsolicited messages from accounts claiming to be influential figures in the blockchain space. 
• Stay aware of the ongoing scams in the world of blockchains to recognize potential threats.

5. Exchange Hacks

Exchange hacks can indirectly cause blockchain compromises through the following interconnected mechanisms:

• Fund theft leads to the loss of assets from the exchange to avoid detection.
• To monetize the illegal gains, hackers might attempt to sell the stolen assets on blockchain networks. This can involve moving the assets to different exchanges.
• Hackers might use the stolen assets to manipulate the prices of crypto on blockchain networks, impacting the broader market.
• If stolen assets are of a particular blockchain’s native token, the hackers might exploit the weak points or attack the blockchain for further gains.

It is suggested to use reputable exchanges while working with cryptocurrency. 

6. Wallet vulnerabilities

Wallet vulnerabilities could cause blockchain hacks when hackers exploit the weak points in crypto wallets to gain unauthorized access to users’ funds. 

• If a wallet’s weakness exposes a user’s private keys, scammers can gain full access to the associated blockchain assets. 
• If seed phrases are leaked, attackers can use them to recreate wallets and access the funds.
• Weak PINs could make it easier for hackers to crack the passwords and access the wallet.
• Outdated software can make the wallet vulnerable. Attackers can easily target the weak points to gain full control over the user’s assets.

To mitigate such risks, we should follow some rules:

7. How to secure blockchains?

• Choose a strong consensus mechanism! Proof of Work and Proof of Stake are widely adopted due to their eminent security features. 
• Ensure that the blockchain has sufficient nodes to avoid centralization and prevent 51% attacks.
• Thoroughly audit the smart contracts and codebase for vulnerabilities. Third-party audits can be employed here.
• Keep the blockchain software regularly updated to address all the weak points.
• Implement a good permissioning and access control mechanism to restrict unauthorised users.
• Employ Distributed Denial of Services (DDoS) protection to safeguard against attacks.
• Store more of the assets in a cold storage medium that is not connected to the internet.
• Create robust monitoring tools and anomaly detection systems to check any unusual behaviour in the network. 
• Comply with important regulations in the jurisdiction, which might include data protection and anti-money laundering (AML) schemes. 
• Promote decentralization to avoid the risk of a single point of failure.

8. Final thoughts

Blockchain networks are growing and flourishing with time! In this era, attackers have also gained enough information to create new hassles in the functioning of these networks. It is always suggested to normalise over-protecting the crypto assets, since once they are gone, they are gone forever! Blockchain hacks are becoming prominent nowadays. Creating awareness about securing them and following the basic safety rules could save the crypto world in the long run!

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