Five Common Blockchain Hacks – Coinpedia

Although blockchains were initially considered “unhackable” by many, this is not the case today!

Blockchain hacks are on the rise, and it’s more important than ever to know how to protect your assets. They can be truly devastating. It’s not just exchanges that are at risk. Individuals can also be targeted by hackers, and even small losses can add up over time.

Anyone who owns cryptocurrency should know how to protect themselves from hacks. This includes individuals, investors, businesses and anyone else using blockchain technology.

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1. Blockchain hacks: What are they?

Blockchain hacks happen when malicious elements find ways to steal or take away digital assets such as cryptocurrencies from blockchain systems. This can be achieved by exploiting the weak points in the technology, smart contracts, or ignorant user activities. The hacks can lead to huge financial losses and disrupt the basic functioning of the blockchains. It is a user’s utmost duty to follow security 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, this means they have more than 50% of the computing power in a particular network. With this kind of power, they can manipulate transactions, double spend coins, or destroy the system’s reliability. To protect yourself from such accidents, the following simple points should be included:

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

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 is a bug in a smart contract’s code, it can be abused by anyone to his advantage. This can 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 entire system secure.

It is advised to have experienced developers thoroughly review the smart contract code to check for loopholes. Consider tools like automated code analyzers to find the problematic spots. Always test the smart contracts before they are included in the network. Use test networks or sandboxes for the analysis. Use well-established libraries and contracts that have already been vetted by the community. Follow the best of security practices for coding and error handling. Keep these contracts as simple as possible to avoid any complexity. Always stay on top of the latest developments in blockchain security to adhere to security best practices.

4. Phishing and social engineering

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

Attackers fake websites that may look authentic. Users are lured into providing their private details, which are later stolen by the attackers. 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 come from authentic senders. They contain links to fake login pages, willing to steal the login details.

To protect yourself from such scams, certain measures must be strictly followed:

Always 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 blockchain world to recognize potential threats.

5. Exchange Hacks

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

Fund theft results in the loss of assets from the exchange to avoid detection. To earn the illegal profits, hackers may try to sell the stolen assets on blockchain networks. This may involve moving the assets to different exchanges. Hackers can use the stolen assets to manipulate the prices of crypto on blockchain networks, affecting the broader market. If stolen assets are from a particular blockchain’s native token, the hackers can exploit the weak points or attack the blockchain for further profits.

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

6. Wallet vulnerabilities

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

If a wallet’s weakness exposes a user’s private keys, fraudsters can gain full access to the associated blockchain assets. If seed phrases are leaked, attackers can use them to recreate wallets and gain access to the funds. Weak PINs can make it easier for hackers to crack the passwords and gain access to 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 reduce such risks, we must 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 excellent security features. Make sure the blockchain has enough nodes to avoid centralization and prevent 51% attacks. Thoroughly review the smart contracts and code base for vulnerabilities. Third party audits can be used here. Keep the blockchain software updated regularly to address all the weak points. Implement a good permission and access control mechanism to limit unauthorized users. Use DDoS (Distributed Denial of Services) protection to protect 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 for any unusual behavior in the network. Comply with important regulations in the jurisdiction, which may include data protection and anti-money laundering (AML) schemes. Promote decentralization to avoid the risk of a single point of failure.

8. End note

Blockchain hacks are a serious threat, but they don’t have to be. By following the tips in this article, you can protect your cryptocurrency assets and protect them from hackers.

9. Frequently asked questions