The short answer is yes, there are ways one can use to exploit a blockchain – in this article, we will dive deeper into them and the differences between a blockchain exploit and an exploit that happened on the blockchain.
What is blockchain?
Let’s start with understanding what a blockchain is. In general, a blockchain is a decentralized data ledger distributed across a network of computers. Transactions are made between different parties directly (user to user, user to exchange, user to the smart contract, etc) and are permanent. The blockchain protocol has rules on transaction verification – mining, staking, etc – and how verifiers (validators) can participate in the network. It also keeps a history of all transactions that happened on the blockchain over time. The innovation here is the guarantee of the fidelity and security of data records, as well as its trustworthiness without the need for a trusted third houston listcrawler party.
How can a blockchain be hacked?
While blockchain can be exploited through a 51% attack where it ceases to be decentralized and come under the ownership of one entity, there are various ways one can hack users or entities using a blockchain.
51% attack (or Sybil attack)
As was mentioned previously, blockchains have validators and miners who verify the transactions – essentially, they are signing over the fact that the transaction did happen, it was genuine and the network works as intended. That opens up a pathway to exploit – if validators or miners collaborate with each other and get more than 50% verification power over the network, they can possibly create a second version of the blockchain which is called a fork. The fork might not have some transactions that were present in the parent chain or introduce new transactions that the parent chain does not have. And while they have over 50% power of the parent chain, they can designate a fork as a true one and have their way as a chain owner.
In reality, such kind of an attack is hard to implement due to the costs. In order to do it, you will need to own over 50% of the blockchain asset used for verification (e.g. 50% of all Bitcoins or Ethereum tokens) – that is practically impossible.
Errors or bugs
In recent years, we have seen a rise in smart contracts. Simply put, the smart contract is a program stored on which has a specific set of predetermined rules and automates transaction execution. And as with any program, smart contracts might have errors and bugs that can be exploited. Sometimes, these bugs are revealed during smart contract audits giving creators the time to fix them before deploying them on chain. Sometimes, hackers find a bug they can easily exploit and steal funds from the contract. The best way to secure against such an event – undergo a continuous audit, use risk management tools like Apostro, and create a bug tha pyay nyo technology bounty.
Hijacking, phishing, social engineering
The easiest way to lose funds is to give away your private keys to someone, and you might not even know that you did it. There are various ways one can fall victim to the hacker: a phishing website, a hacker gaining access to your device through open wifi or virus, clicking on suspicious links – the list is endless. The only way to protect yourself from it is to be alert and not store your crypto assets on devices connected to the internet.