The Blockchain has in no small measure posed a worthy replacement to the traditional banking system, liberalizing access to wealth and enlightening the masses on asset creation and financial intelligence. This and many more have made Blockchain and its services gain so much popularity in recent times with over a million transactions being performed on the Blockchain every second. Not to ignore the fact that Blockchain allows for the easy movement of assets and money across geographical barriers faced by traditional banking thereby eliminating additional fees.
However, the Blockchain sector does not exist with its deficiencies. Due to its decentralized and liberalized structures, quite a lot of fraudulent malicious activities get on daily leaving little or no trace. Not too long ago, a major crypto currency exchange went bankrupt due to a backdoor found on their Blockchain resulting in a loss of user funds and rendering a lot of families penniless. All these and many more are some of the concerns of the Blockchain industry.
With financial experts predicting that Blockchain will in no distant time replace the fiat currency and with countries like El Salvador already adopting cryptocurrency as legal tender, the future seems bright for the Blockchain industry, but with these security threats, can the stability of the Blockchain and the eventual expansion of the Blockchain market be hampered with?
This article aims to highlight common security threats and loopholes present in the blockchain industry and the principles behind such attacks. Awareness of these forms of attacks and taking pre-emptive measures to prevent these would prove beneficial in the long run and help build consumer trust. With this, let's get started.
Double Spending
The concept of double spending is routinely faced upon the creation of a new Blockchain protocol or web3 Dapps, Funny as it sounds, what does double spending mean? This is when the user maliciously exploits errors in the system to spend the same unit of cryptocurrency more than once on a blockchain protocol. Tackling this can be quite cumbersome as it involves the use of highly secured cryptographic algorithms and other systems to gauge the system and eliminate such. Failure to do so could ultimately result in loss of user trust in the blockchain and incurring losses on the part of the managers. An example of this attack was occurred in 2019/20, famously tagged the 51% attack on the Ethereum classic network.
Sybil Attack
This attack involves a group of malicious entities trying to take control of an entire blockchain
service by creating multiple nodes with malicious functions. This often results in blockchain manipulations and draining financial losses. The presence of multiple nodes in the user blockchain could also pose a risk to user identity as they tend to intercept user details and IP addresses increasing user distrust in the blockchain. The result of these, attacks is to achieve what is popularly known in the blockchain security space as the 51% attack. This involves controlling more than 50% of the blockchain network. In 2018, the Verge (XVG) and Bitcoin Gold (BTG) were affected by the Sybil attack resulting in heavy losses.
Distributed Denial-of-Service (DDoS) Attack
Distributed denial of service is a common cause of concern in the web2 space and this isnβt any different in the blockchain although unlike in the web2 space in which DDoS usually results in the slowing down of website function, the blockchain, due to its decentralized model has a form of immunity against that. This form of attack involves massive flooding of the blockchain protocol with spam transaction information, congesting the ledger network and delaying the completion of legitimate blockchain transactions. This also builds up user distrust and defeats the entire purpose for which blockchain is built.
Also, The DDoS attack may be launched at smart contracts creating parasitic contracts which delay the execution of other contracts. Solana and Arbitrum have also been under DDOS attacks in the past.
Eclipse Attack
This form of attack entails the isolation of a specific node within a decentralized system surrounding it with malicious nodes and exploiting its connections with other nodes to manipulate blockchain transactions. This can be achieved by flooding the nodes with several requests, forcing the node to connect to these malicious bots and injecting malicious codes into the node thereby disrupting the blockchain
Timestamp Manipulation
Every blockchain transaction is attached to a timestamp which represents the time the transaction was performed. However, as seemingly harmless as this seems, it can serve as an access point of vulnerability to the blockchain by hackers. It involves manipulating the timestamp of a block, disrupting the sequence of the smart contract execution, and ensuring the execution of irrelevant smart contracts congesting the system which drain the blockchain resources. A good example of this is the DAO attack on the Ethereum blockchain.
These examples highlight the need for the blockchain developer to be aware of these vulnerability mechanismsβ and properly build secured and efficient blockchain protocols and services
With this, we have come to the end of the article. Feel free to drop any questions or comments in the comment box below. Till next time, keep on innovating!
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