By Mila Bera

Blockchain Security: How Secure Is it Really?

When most people think of blockchain technology, they think of Bitcoin. There’s a good reason for that – the value of Bitcoin has skyrocketed in recent years, making some people extremely wealthy. But what many people don't know is that blockchain technology is far more than just a digital currency. It could completely change the way a number of industries operate, including supply chain management, healthcare, and finance.

But with great power comes great responsibility – and that's especially true regarding security. You'll hear many enthusiasts using the word "security" to explain why blockchain technology is the next best thing. But every now and then, you’ll also hear about hackers successfully stealing millions worth of cryptocurrencies. So, how secure is the blockchain in reality?

Let's take a look at some of the issues regarding blockchain security and see whether the "ledger that can't be tampered with" is really impenetrable, as it says on the tin.

How Secure Is Blockchain?

The first thing to understand about blockchain security is that it has a far from perfect record. Hackers have stolen millions of dollars worth of Bitcoin by taking advantage of vulnerabilities in the system.

The first instance of this was the Mt. Gox hack, in which hackers stole 850,000 Bitcoin (worth nearly $480 million at the time) from the world's largest Bitcoin exchange. The Coincheck hack in 2018 was the biggest hack in crypto history, when approximately $534 million worth of crypto was stolen. The latest noteworthy attack happened in 2020, when approximately $281 million worth of coins and tokens were smuggled out of the KuCoin exchange.

Crypto enthusiasts will point out that in these major heists, it was the poor security measures set in place by the exchanges and wallets that made the theft possible, not problems with blockchain technology itself. This is true – the most common way to steal cryptocurrencies is to rely on human error. Most attacks are enabled by poorly secured wallets or cryptocurrency exchanges. Another way for this to happen is through phishing scams, in which hackers send fake emails that trick people into giving them their private keys.

The problem is that blockchain doesn’t exist in a vacuum. It has to interact with exchanges and wallets so that users can actually purchase, trade, or simply hold their cryptocurrency. However, for the sake of the argument, let’s put blockchain in a vacuum and discuss its vulnerabilities from that perspective.

What Are Some Common Blockchain Hacks?

Perhaps the most common way to steal Bitcoin is through 51% attacks. This is where a group of miners control more than 50% of the total mining power on the network and use this power to double-spend coins or prevent new transactions from being confirmed.

However, recently, it was discovered that attackers don't even need 51% control to pull this off. In fact, they only need around 30-40% to carry out a successful double spend. The “selfish miner” method is another common way of cheating the system; it happens when one node tricks another into solving already solved puzzles. The communication between nodes can also be tampered with, leading nodes to accept incorrect information that benefits the hackers.

It might seem difficult to tamper with nodes, as the system is inherently decentralized. However, major cryptocurrencies are not as decentralized as you’d probably want them to be. In fact, the largest Bitcoin or Ethereum mining farms have much more control than you might expect. The top four Bitcoin mining operations control more than 53% of the weekly mining capacity. Following the same parameters, Ethereum is even less decentralized, as the three largest Ethereum miners account for 61% of all mining.

Ethereum's smart contracts are another weak link, as they have been exploited numerous times in the past. Another famous hack occurred in 2016 when a user exploited a vulnerability in the DAO (decentralized autonomous organization) smart contract to siphon off $50 million worth of Ethereum.

But it's not just Bitcoin and Ethereum that are vulnerable to attack – all blockchain systems are. Even the much-hyped Bitcoin Cash hard fork was not immune to compromise, as a $30 million double-spend was successfully carried out just a few months after its launch.

And while hard forks can sometimes help minimize the consequences of these attacks by literally rewriting the "untamperable" history, they also come with their own risks. One famous example is the Ethereum hard fork that led to the creation of Ethereum Classic. This hard fork was controversial, to say the least, and it ultimately split the community in two.

Should We Even Use the Word Security When Explaining Blockchain?

So, while its history has shown that blockchain technology is undoubtedly groundbreaking and has the potential to change the world as we know it, it’s not without its flaws. As we’ve seen, this technology is vulnerable to attack, and even the best-known and most popular systems are not safe from exploitation.

While these exploitation methods may sound complicated, they’re actually quite simple, which is part of the problem. Because blockchain technology is still in its infancy, there are a lot of vulnerabilities that haven’t been discovered yet. And as more and more people start using it, we will likely see even more hacking attempts.

So what does this all mean for the future of blockchain security? Well, it's hard to say. On one hand, the technology is not as secure as it could be. On the other hand, it's also clear that those security problems are not insurmountable. Over time, we will surely see more secure blockchain systems emerge. In the meantime, it's important to be aware of the risks and take steps to protect yourself.

How to Keep Your Coins Safe

The most important thing you can do is keep your private keys safe. Never store them online or on your computer – instead, use a cold hardware wallet. This will ensure that even if your computer is hacked, your coins will be safe.

You should also avoid using exchanges and online wallets whenever possible. If you do use them, make sure you only keep a small number of coins in them and enable two-factor authentication. Even investing in a solid VPN solution might be a good idea, especially if you live in a country that falls under the 14 Eyes jurisdiction. The newest trend in VPNs are blockchain-based ones, so if you’re looking to improve your browsing security (and the security of your private keys), taking the time to find the right VPN will certainly pay off.

Finally, make sure to stay up-to-date with the latest security threats. Hackers are always coming up with new ways to steal coins, so it's important to be aware of the latest scams and know how to protect yourself.

By following these simple steps, you can help keep your coins safe and secure. Don't let security concerns deter you from investing in blockchain technology – instead, use them as motivation to take extra care of your coins. With time, the industry will become more secure, but in the meantime, it's important to be vigilant.

Mila Bera - Author's bio

Mila’s contribution to DataProt is her in-depth, meticulous, and critical reviews of cybersecurity products, password managers, and internet privacy tools. With a BBA and finance background, she enjoys studying the economy and following up on the stock market. Loves reading up on the newest trends, and has a passion for traveling the world and experiencing different cultures.

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