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How Hackers Have Been Targeting Blockchain

Nov 12, 2017 Posted /  4181 Views

How Hackers Have Been Targeting Blockchain

The blockchain technology has provided hackers with a new challenge as they try to find loopholes in the system. Blockchain eliminated trust (third party authorization), replaced it with a distributed ledger technology (DLT) which makes it more difficult for hacking. For hackers to succeed at hacking a blockchain they will have to take over every key and miners system which is virtually impossible for now due to computational power and the split time required to do so.

This does not mean that there has not been a successful intrusion into blockchain-based applications especially attacks on cryptocurrency wallets around the world. The surge in the value of Bitcoin and Ethereum – two most popular cryptocurrency – has made exchanges and wallets where cryptocurrency are stored regular targets of hackers.

Most notable blockchain hacking has targeted cryptocurrencies, as it is the most popular application of the blockchain. The Ethereum hacking is a significant instance of blockchain hacking. While the blocks were not compromised, a massive amount of Ether was lost to the hacking incident. How did they do it? A private key was stolen from a multi-signature wallet and the computer overtaken, stealing $31 000 000 worth of ether. Save for the quick intervention of white hat hackers who hacked the system themselves and withdraw the remaining Ethers into their account, additional $150 000 000 would have been stolen. The white hats have so far refunded the Ethers.

Other notable hackings include the Mt. Gox hack, which is by far the largest in the history of blockchain cryptocurrency breach. According to reports, about $473 million worth of bitcoin was stolen from the exchange. The attackers explored the carelessness of Mt. Gox not having the Version Control Software (VTS) in their database to check for a condensed and complete history of changes made in a codebase. Customer’s bitcoins was lost with this hack and that was the end of Mt. Gox exchange.

The DAO hack is another important intrusion into the blockchain in June 2016 with approximately 3.6 million Ether almost stolen. Decentralized Autonomous Organization (DAO) is significant because it is an Ethereum project on the blockchain, which has the capacity to enhance other applications of blockchain aside cryptocurrency. Its objective is to codify the rules and decision making of an organization. It also aims at getting rid of documents and human reliance in governing and handling of data thereby creating a structure with decentralized control. If successful, it would be applicable to the banking and finance sector and likewise the smart contract. The DAO hacker created a child DAO and channeled $50 million worth of ether. The Ether was recovered through the hard-fork process and the prompt action of the Ethereum team.

There is an element of state-backed hacking of the blockchain and cryptocurrency in recent times. Between May and July 2017 there were reports that North Korean hackers have been infiltrating cryptocurrency wallets and exchanges. There were substantial attacks on South Korean wallets. According to cybersecurity firm, FireEye, various attacks on cryptocurrency wallets came from North Korean hackers. On April 22, four wallets on Yapizon cryptocurrency exchange were hacked from North Korea. Four other hacking activities were carried out on three South Korean exchanges from that first recorded occurrence. This could be a direct result of various economic sanctions placed on the totalitarian country because of its hell-bent missile missions.

Interestingly, the blockchain community has come out stronger against this various form of attacks by hackers. Various degrees of security measures have been taken at different levels to secure cryptocurrency wallets and exchanges. Ethereum is stronger now and after the 2010 hack of Bitcoin, it has become virtually impossible to do so again. Hackers will continue to try to penetrate and each time they do security measures will always triumph.

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Tags: bitcoin blockchain technology cryptocurrency blockchain community targeting blockchain blockchain hacking

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