“Can blockchain be hacked?“ is a frequently asked issue as blockchain technology is being used in more and more areas worldwide. Because blockchain technology is referred to as an “immutable ledger system,” many people—including those who are not tech savvy—believe that it is safe. Although the blockchain itself is extremely secure, experts warn that the networks and procedures that are linked to it may be weak. Although it is possible for transactions on the blockchain to be modified and for assets to be stolen, these events are not caused by flaws in the blockchain itself. It is the type of setting where assets that use the blockchain are stored and exchanged.
Centralized exchanges for cryptocurrency
Blockchain technology’s integrated security does not shield centralized cryptocurrency exchanges from hacking. Most of those hacks on the blockchain have targeted the exchanges, using their centralized nature against them. As in the case of decentralized assets like Bitcoin, they are secure by design, however, when they are vulnerable to hacking. To manage these risks, try decentralized exchanges (DEXs) high-level security, secure wallets, and monitoring safety producers and authorities of exchange resources.
The case of the MT Gox hack and the subsequent enormous theft serve as a constant reminder of the weaknesses of exchanges that can be exploited. There is a consistent pattern of stories of scammers that manage to exploit some weaknesses in headlines, frequently highlighting malicious actors exploiting weaknesses in various exchanges, making off with stolen assets. Rug pulls are a concern where scammers trick investors into fake opportunities and then take their money.
It is important to understand that these security issues happen outside the blockchain, often due to weaknesses in exchange security, user account management, and how assets are stored. For example, the consensus of all Bitcoin owners utilizing the blockchain ledger verifies ownership. A party that controls more than half of the network’s mining power might potentially edit transactions, spend coins twice, rewrite transaction history, and interfere with the network’s consensus-building process in a 51% attack.
51% attack
The 51% attack undermines blockchain’s decentralized and untrustworthy characteristics by granting one group network control. Although a true “blockchain hack” is uncommon, miners who control more than half of the network’s hash rate can possibly double-spend money, influence transactions, and interfere with consensus in the 51% attack. The 51% attack is cited by experts as a serious weakness in blockchain networks. This exploit targets the consensus mechanism, where transactions are verified by a community of owners. For instance, by utilizing the blockchain ledger, all Bitcoin owners can collectively agree to validate ownership.
A 51% attack takes over more than half of the network’s diminishing hash rate, giving a group the ability to manipulate transactions, double spend coins, change transaction history, and interfere with network consensus. By doing this, the decentralized and untrustworthy character of blockchain is compromised, enabling one organization to control the network.
Doing a 51% attack on a blockchain network means having control over more than half of it, which gives the attacker a lot of power. However, doing this is very hard, especially for big networks like bitcoin or Ethereum. The computer power, energy costs, and infrastructure needed are too high. Also, because these networks are decentralized, it is hard for one group or person to take over. Therefore, 51% of attacks are very rare, helping to keep major blockchain assets secure.
A Sybil attack, on the other hand, is about making many fake identities and accounts. It is often mixed up with a 51% attack, but they are different. A Sybil attack is meant to change how the network works by using fake accounts, but it doesn’t give control over ownership. A 51% attack requires having at least half of the total mining power or assets of the blockchain. Splitting resources among a lot of fake accounts won’t reach that level. To do a 51% attack, an entity needs to hold a large part of the network’s mining power or assets, making Sybil attacks useless for this purpose.
Recent developments
The belief that blockchain cannot be hacked has lately changed. Since there are many reports coming up on the hacking on blockchains, situations have changed. Blockchain ledgers were formerly mostly used for Bitcoin, but smart contracts have altered that. Smart contracts open the door to new applications of blockchain technology beyond finance by enabling the execution and storage of code and data on the blockchain.
As knowledge of blockchain and cryptocurrencies increased, smart contracts became more and more popular. Initially, Ethereum dominated smart contract facilitation, then Bitcoin SV and newcomers like Solana called “Ethereum killers,” emerged with promising capabilities. Despite their strong security features, such as encrypted transaction records and interconnected distributed ledgers, smart contracts can be attacked in ways that cryptocurrency cannot.
According to IBM, blockchain transaction records are encrypted, making them hard to hack, and altering a single record requires modifying the entire chain. However, vulnerabilities in smart contract code or adjacent blockchain components can create the illusion of hacking the blockchain itself, introducing a unique security risk distinct from traditional cryptocurrency hacking.
Conclusion
All of this proves one thing: how things that are similar can be true at the same time. When a blockchain-related occurrence is in the news, people are likely to hear the phrase “blockchain hacked,” regardless of whether it is true or not. On the one side, many of the processes and systems linked to a blockchain and an asset are vulnerable. That’s a significant consideration as we see additional types of crypto coins and smart contracts emerge in an ever-expanding network of new financial technology investments.