Is Blockchain Hackable? Complete Analysis [2023]

If you’re into crypto, you’re likely familiar with blockchain technology, how it works, and why it exists. But is blockchain hackable?

Although its decentralized nature makes it ideal for applications that need security and transparency, even blockchain has “gaps in the law.” Hence the world of crypto is rich in high-profile hacks that cost companies and individuals millions, if not billions, of losses.

But how can it be hacked, and how can you protect your digital assets? Learning these two things is crucial if you want to keep your hard-earned crypto safe.

In this article, we uncover how hackable blockchain is and how you can protect your crypto and talk about some of the most common hacks out there!

What Is Blockchain & How Does It Work?

Before getting into blockchain security, let’s first remind ourselves what blockchain itself is. Blockchain is a distributed ledger technology (DLT) that’s designed to bring trust and confidence to companies that use it. It’s a decentralized ledger system duplicated and distributed to every computer in the network.

Blockchain uses technology that has inherent security qualities, as they’re based on decentralization, consensus, and cryptography principles. This means that each new block in the blockchain connects to the previous blocks, which is impossible to hack.

Introduced in 2008 as a backbone for Bitcoin, blockchain has been updated and evolved to the point that it is used in numerous industries, such as:

• Finance
• Healthcare
• Supply chain management

But how is blockchain’s decentralized database maintained? Well, at its core, it’s maintained by a network of computers, meaning that no central authority controls the database and all the participants of the network work with the same information.

Because all network participants have the same information, blockchain is difficult to manipulate or have its data corrupt. This transparency is key, as it makes blockchain ideal for applications that require accountability and trust.

Essentially, this means that every time there’s a new transaction, it is added to a network-verified block. Once verified, the block is added to an already existing blockchain, which creates a permanent record of the transaction that can’t be altered.

How is Blockchain Secured?

So, now that we’ve covered blockchain basics, the question remains: is crypto hackable? The answer is yes, blockchain is hackable, but it’s quite difficult for hackers to do so.

This is mostly because blockchain uses cryptographic algorithms, which ensure that all transactions are private, and, most importantly, secure. It also allows for smart contracts, self-executing contracts with the terms of agreement between the seller and the buyer, which are written directly in code.

Lastly, participants of each blockchain network regularly detect and address any suspicious activity. You can consider them always-active customer support or MSP that doesn’t allow anything to go past them.

What is a 51% Attack?

When talking about blockchain, and especially its hackability, we must mention a 51% attack, also known as a majority attack.

A 51% attack is, as its name suggests, a type of attack by miners who own more than 51% of the nodes on the network. By controlling such a large percentage of the network, they have control and power to modify the blockchain.

Basically, the attackers who control the majority of computing power can alter or delete blocks, double-spend coins, and reverse transactions after they’ve been confirmed.

For example, an attacker who has control of the network’s computing power can initiate a transaction to buy goods or services. Their transaction will then be confirmed after a certain number of blocks has been added to the blockchain. Moreover, they can also create a new version of the blockchain without the transaction, thus reversing it completely.

However, even though 51% attacks are theoretically possible, in reality, they are almost impossible for large networks. For instance, to make a 51% attack on Bitcoin, the attacker would have to have more computing power than all other network participants altogether.

But, this is not the case for smaller blockchain networks, as they are more vulnerable to majority attacks and it’s easier for attackers to gain control of a huge portion of the computing power.

One 51% attack that left a huge trace in the media over the last few years was the 2018 Verge attack. Namely, the cryptocurrency Verge was a victim of two majority attacks in a span of just a few weeks and lost 250,000 tokens. Now, although 250,000 tokens doesn’t look like much, they were actually worth millions of dollars.

To prevent these attacks, blockchain networks can opt for proof-of-stake and proof-of-authority consensus mechanisms. The former requires participants to hold a certain amount of crypto before they can participate in the validation process, while the latter requires them to have a certain level of authority. This makes it more difficult for attackers to gain control of the network.

Other Common Crypto Hacks

The 51% attack is one of the most commonly known attacks on the blockchain network. But, even though blockchain is secure, there are other common crypto hacks, which we’ll discuss in the section below.

#1. Centralized Crypto Exchange

Centralized crypto exchanges (CEXs) are exchanges that store unimaginable amounts of crypto, which makes them obvious targets for hackers.

Possibly the most popular CEX hack was the 2014 Mt. Gox hack. Namely, it’s said that two men hacked the Mt. Gox exchange and stole 850,000 BTC and made the company’s management file for bankruptcy. Consider that this much BTC would now amount to a digit with more than a dozen zeros in today’s US dollar worth.

To make things even worse, those affected by the Mt. Gox hack couldn’t get their funds back until 2022. And even then, they only managed to get a portion of it.

Due to this and many other hacks, many major exchanges, such as Coinbase, Binance, etc., have started offering insurance protection. On top of that, they have started taking extra steps to improve their security, such as implementing two-step authentication processes.

#2. Crypto Wallets

If you’re going to handle any cryptocurrencies, chances are that you’ll likely need to use a dedicated crypto wallet for that purpose. Such wallets are used for storing and managing various cryptocurrencies.

The most common crypto wallets are hot and cold crypto wallets. The former are connected to the internet, which makes them prone to hacks, while the latter work offline and are harder to breach.

To get access to a cold wallet, hackers need access to a private key, which they can only get from the owner. That’s why they’re recommended instead of hot wallets.

One of the most popular examples of crypto wallet hacks is the 2022 Solana hack, where the company lost around $8 million that was linked to the Slope mobile wallet.

#3. Smart Contracts

A smart contract is a program that works on a blockchain. It performs numerous functions without the need for human intervention, such as token swaps on DEXs and minting NFTs. Now, a smart contract is only secure if its code is well-written. That’s why if a developer makes a mistake in their smart contract, hackers can easily breach into it and steal crypto.

A popular example of a smart contract hack is the infamous “DAO hack.” DAO, which stands for “decentralized autonomous organization,” is a smart contract-based governance structure that can mostly be seen in decentralized finance (DeFi).

Namely, in 2016, a group of hackers got their hands on around $50 million from the DAO because of a weakness in the smart contract code. After this event, the Ethereum network forked into Ethereum and Ethereum Classic.

How to Secure Cryptocurrency

Although things might seem dire for the case of blockchain hackability, don’t worry—things aren’t as bad as they might seem. To keep your cryptocurrency secure, you can:

• Use a cold wallet. First and foremost, you should use a cold wallet, also known as a hardware wallet. It will allow you to store your private keys offline on a device that’s similar to a USB. Even though hardware wallets aren’t free like some software wallets, the price is definitely worth it as they provide increased security.
• Use strong passwords. Next, you should come up with a strong password that has letters, numbers, and different symbols that make it harder to decipher. Also, avoid using the same password you use for your social media and other accounts.
• Don’t share your private keys. Although this tip might seem obvious too, you shouldn’t give anyone your private keys—you should keep them safe as you would your regular wallet. It’s also recommended to write down the string of words you come up with and place the note in a safe location, such as a safe or a drawer with a key you only have access to.
• Enable two-factor authentication (2FA). If you opt for a software wallet, you should choose one that has 2FA enabled. Such wallets come with an authenticator app like Google Authenticator. 2FA adds another step to the sign-in process, which ultimately reduces your risk of getting hacked.

Key Takeaways

At the end of the day, blockchain offers too much for you to look past it because you’re afraid of being hacked. You should keep in mind that it’s very hard for hackers to breach into blockchain and that you have numerous ways of keeping your digital assets safe.

Hopefully, this article has helped you understand blockchain hackability and provided you with some handy tips on improving your security. So, use cold wallets or any other strong wallets, don’t share your private keys, and enable 2FA if you’re using a software wallet, and you’ll be good to go!