Can Blockchain Be Hacked?

Blockchain is considered hack-proof because of its decentralization feature and security. No transaction can be executed on it without the awareness of peered computers. Blockchain also allows users to record transactions over a distributed network of computers, making it permanent and unalterable. In other words, blockchain is transparent.

But despite maximum security and little incentive reward for hacking blockchain, traders, investors, and cryptocurrency cofounders have reported many cases of attacks. Hackers may hack some blockchains as a result of a slow transaction process due to proof of work, or through a 51% attack. Attacks could also be due to insufficient security and smart contract bugs on blockchain platforms.

But What Makes a Blockchain Withstand Hacks? How can blockchain be hacked? Is blockchain really secure? These questions are what I’ll discuss with you in this article. I’ll also cover How Bitcoin can Be Hacked? And lots more, so without further ado, let’s get started.

What Makes a Blockchain Withstand Hacks?

The features below are the reasons why it’s difficult to hack blockchains:

❖ Peer-to-peer and Open-Source Protocols

Blockchain uses peer-to-peer networks, open-source, and public systems that allow rightful users with knowledge and equipment to participate in the networking. These transparency features can make it difficult for hackers to hack blockchain because if they gain control over some networks, they may not be able to manipulate others.

❖ Decentralization Policy

The decentralized nature of blockchain that distributes networks among peered computers rather than being centered may also prevent attackers from hacking. This is because before a transaction can be confirmed on the blockchain, a consensus must be made among peers. Thus, if consensus is not reached, the transaction will be rejected.

❖ PoW and PoS

Different technological mechanisms such as Proof of Work and Proof of Stake that work together to protect technology can also reduce cyber-attacks on the blockchain.

For example, in Proof of Stake based systems, stakes determine the strength of the network. This means attackers will only succeed if they control the majority of the stakes which is unlikely, considering the fund to accumulate over 51% of all coins in circulation.

❖ Hash Algorithm

The hashing algorithm of blockchain is another feature that can prevent blockchain from hackers. This is because, on the blockchain, each transaction called a block is connected to the previous one, forming a blockchain. Each of these blocks however has a cryptographic element that makes it unique and difficult to access by hackers.

For example, the Bitcoin blockchain uses a double SHA-256 hash function that takes transaction data and compresses it into a 256-bit hash.

❖ Immutability

Another blockchain feature that might prevent hackers is its inflexibility.

Once a transaction is made on the blockchain, it cannot be reversed. Any attempt to alter this will not be successful. Even if the hash is reversed, it’ll not be validated by other nodes because the data contained on each block is unique.

Meaning any alteration will result in different hash output, making it unacceptable to other networks.

❖ Quantum Computing Effect

For some cryptocurrencies, if cyber attackers are almost successful in their block hash process, say at the middle of the chain; the attackers will still need to alter the previous blocks to align them with the new block. However, this is not always feasible.

For instance, in the Bitcoin blockchain, re-hash is possible only if the next generation of quantum computing is used. But the sad news to hackers is that quantum computing does not currently exist. Even if it does, there’s a tendency that blockchain developers would create a blockchain-based quantum defense mechanism to prevent quantum attacks.

❖ Economic Reason

Like I said earlier, for hackers to hack the blockchain, they’ll need to acquire 51% of the coin in circulation. However, when this happens, there’ll be scarcity in the coin market, resulting in an increase in coin value. This’ll facilitate traders to trade their coins. The consequence of this however is that the price of the coin will crash in the market due to excessive supply.

This can also prevent attackers from hacking considering the low economic benefit on their sides.

4 Ways Blockchain Can Be Hacked

Although blockchain is believed to be extremely secure, yet, there have been a few hack cases recently. Below are certain situations in which hackers can hack blockchains:

1. 51% Attacks

This hacking is common among smaller scale blockchains but not on larger and more complex ones, considering the money, effort, and other resources needed to be executed. It occurs when hackers control more than 51% of the mining process, giving them much control.

In this scenario, an attacker can alter and create a second version of the blockchain (folk) and designate it as the original version. He can also effectively invalidate previous transactions and create double spends that allow him to execute the same transaction many times.

Cryptocurrencies that are vulnerable to 51% attack are Bitcoin Gold, Electroneum, Ethereum Classic, and recently Grin.

2. Smart-contract Bugs

Smart-contract bugs are emerging blockchain security flaws whose consequences blockchain researchers are beginning to discover. Ethereum classic is a victim of this attack and what attackers do is, after gaining more than half control of the network computing power, they’ll begin to rewrite the transaction history.

This gives them the power to spend the cryptocurrency multiple times, a condition known as double-spending.

3. Creation Errors

This is a rare phenomenon that’s common among larger blockchains. It occurs when there’s a security flaw in the creation of blockchain, prompting attackers to identify the vulnerabilities and make an attempt. This has resulted in smart contracts, which use a blockchain network to operate.

When security glitches occur on the blockchain network where a smart contract operates, hackers may successfully steal money from users without being noticed. This is because the theft activity will not be reflected in the system.

And because the blockchain block is immutable, the stolen money cannot be retrieved except if you make a fork that all users recognize as the authoritative blockchain.

4. Insufficient Security

This blockchain hack is common on most cryptocurrency trading platforms. In this phenomenon, hackers can succeed in accessing and hacking users’ data when the security surrounding the platforms is weak.

Frequently Asked Questions

Below are common questions I see most blockchain users asked:

● Why Is It Difficult To Hack Bitcoin And Other Reputable Solid Cryptocurrencies?

It’s difficult to hack bitcoin and other reputable solid currencies because of the extreme increase in the price of cryptocurrencies and hash rate. Also, 51% control is needed by hackers to hack cryptocurrencies.

For example, 51% of $68 billion of the current market of Ethereum is needed by hackers to gain control.

Another reason why it’s difficult to hack blockchain is that some cryptocurrencies such as Bitcoin give incentives to miners to remain honest throughout. Even if hackers successfully attack the network, miners will crash the price and devalue the cryptocurrency that’s just stolen.

● Why Can Blockchain Be Considered Hack-Proof?

Blockchain is considered hack-proof because the system is frequently reviewed by the entire network. This means to add a new block to the system, participating miners that update the blockchain have to continuously solve complex mathematics created by the cryptographic hash function.

However, once the math is solved, every node in the system must agree to its validity before being added to the database. If otherwise, although very unlikely, unless “double spending”, the currency will not be added.

● How Does Blockchain Get Hacked?

It’s very hard to hack blockchain, especially reputable cryptocurrencies like bitcoin and Ethereum. Hackers that’ll hack these cryptos will have to undergo rigid processes including manipulating miners who’re loyal to blockchains.

Also, you’ll have to defeat computer quantum if you’re targeting bitcoin or Ethereum. But the sad news is that quantum does not exist presently and even if it exists, there’s the possibility that developers will develop it strong enough against attack.

❖ Is Blockchain Really Secure?

Yes, blockchain is really secure considering the decentralization policies, peer-to-peer network, and other features that are stated above. However, while there may be a few recent blockchain attacks, rarely have attackers hacked renowned blockchains like Bitcoin and Ethereum.

Even the developers of the new coins that were recently hacked are working ceaselessly to tighten their security against future attacks.

● What Aspect of the Blockchain is Vulnerable to Hacking?

The aspects of blockchain that are vulnerable to hacking include interfaces such as wallets where cryptocurrencies are handled and users can trade.

Websites are also vulnerable to hacking.

● How Can Blockchain users Protect themselves From Being Hacked?

Blockchain users can protect themselves from being attacked by keeping their private keys, passwords, and other sensitive information in a secured place.

● Can blockchain Survive without the Internet?

No, blockchain cannot survive without the internet. This is because blockchain needs the internet peering nodes and share information.

● Has Bitcoin Blockchain Been Hacked?

No, Bitcoin cannot be hacked. This is because of the extreme security of the coin, plus its increased hash rate.

Also, the increased price of bitcoin may make it difficult for attackers to hack.

● Can Bitcoin Blockchain Be Hacked By Quantum Computer?

Yes and no. The reason for yes is that if quantum computers exist, they may hack Bitcoin. Otherwise, the Bitcoin blockchain will not be vulnerable to a quantum computer attack.

Even, if quantum computers exist, Bitcoin developers will build software that can prevent quantum computing from success.

● Can Bitcoin Get Shut Down?

No, Bitcoin cannot be shut down because of its strong security and decentralization policy. However, under extreme circumstances such as massive global power outages, shutting down is imminent as nodes will not be able to communicate. This is most unlikely to happen though.

Also, the critical bug contained in the bitcoin update which always remains undetected can cause temporary impairment of the blockchain network resulting in a steep drop in Bitcoin price and a fork of the blockchain.

● Can The Hackers Be Defeated?

Yes, blockchain hackers can be defeated. There are different startups including anchain.ai that uses artificial intelligence to monitor transactions and detect suspicious activity to address blockchain hacking threat. This startup can also scan smart-contract code for known vulnerabilities.

Other companies such as Tsankov’s and chain security are developing auditing services based on an established computer science technique called formal verification to conform the work to what’s created. These allow smart-contract creators to eliminate many of the bugs affecting blockchain.

The limitations of these startups are they’re time-consuming and expensive.

Conclusion

By now, I’m sure you’ll be able to provide an answer to the question “Can Blockchain Be Hacked?” If you can’t, here’s a recap. Blockchains are rarely hacked although there’ve been some cases such as 51% attack.

Poor security and execution of transactions on trading platforms are other factors that can cause the hacking of blockchain. However, the combinations of decentralization features of blockchain, cryptographic function, as well as provision of incentives for miners have been the major reasons why altering blockchain for fraudulent acts has been difficult.

Other factors such as the increase in the number of nodes or stakes can also prevent attackers from hacking the blockchain.