Once heralded as secure and unhackable, blockchain technology is showing significant signs of vulnerability. Just last month, a hack against Ethereum Classic was successful in skimming $1.1 million from the well-known blockchain. The interesting thing is that hackers didn’t break the encryption technology that protects the chain, but they exploited the very mechanism that allows blockchains to work in a decentralized manner.
To avoid running transactions through a central authority, most blockchains rely on a public community of nodes that help verify transactions via a consensus model. Before any transaction can be committed to a blockchain, 50% of the nodes must agree that a transaction is proper. Should anyone wish to inject a nefarious change into a blockchain, they would need to gain control of more than half of the network nodes. In theory, this has been thought of as a near impossibility.
In practice, however, consensus attacks are not only possible, but happening fairly frequently. In 2018, hackers began targeting smaller, less traded cryptocurrencies with consensus attacks. Last month’s hack on Ethereum Classic, a top 20 currency, was a wake-up call to the industry.
MIT Technology Review has a sobering write-up of these security breaches, including a round-up of issues involved with the flawed implementation of smart contracts and cryptocurrency exchanges. Check it out – it’s a quick, informative read about technology impact law and technology.
PhotoIllustration by Data Narro. Photo provided by Pexels.com.