An ever-expanding universe of cryptocurrencies has made online transactions more affordable and convenient than ever. At the same time, the platforms that power these digital currencies are now under constant assault from malware.
Blockchain technology is a brilliant invention that has been credited with bringing transparency and accuracy to financial transactions in an untrustworthy marketplace. However, it can be incredibly easy to commit fraud by exploiting its vulnerabilities. One of the most common ways hackers can cause damage is by changing data on a public blockchain ledger.
Origin of Blockchain Technology
Originally, blockchain technology was developed by a person or group of people using the name Satoshi Nakamoto. In 2008, Nakamoto published a white paper that detailed the benefits of using a decentralized, digital ledger to record transactions.
The first application of blockchain technology was Bitcoin in 2009. This revolutionary platform allowed two users on opposite ends of the globe to securely exchange currency without needing a trusted third-party intermediary such as a bank.
As blockchain technology gained momentum, it was adopted by a range of major companies and government agencies.
While blockchain technology is incredibly useful for financial transactions, it has also been widely implemented in a variety of other applications. For instance, one of the most prominent examples of blockchain implementation is in the healthcare sector with its potential for managing electronic health records.
Blockchain could prove useful for hospitals on many levels because it offers an additional layer of protection from cyberattacks. It also allows patients to control their own information.
These are just a few examples of the many ways blockchain is being used in today’s economy. As you can see, this technology is truly revolutionizing how transactions are made and stored. However, it is not without its flaws.
The same features that make blockchain so appealing to financial institutions and business leaders are also what make it extremely vulnerable to cyberattacks.
Exploiting the Cyber Vulnerabilities of Blockchain Technology
The fundamental feature that makes blockchain so appealing to investors and businesses is that it operates on a decentralized network. This means that there is no central authority that can be attacked or hijacked. Instead, blockchain’s digital ledger can only be accessed by its current members and nobody else.
Since nobody is in charge of overseeing transactions on the blockchain, companies and individuals are merely conduits for sending and receiving payments. Attacks on blockchain platforms can occur at any time and without warning because no individual or group is responsible for maintaining the integrity of the system.
The simplest way to exploit a cyber vulnerability in blockchain technology is to change the data stored on it. Anyone who has access to the software used to run the blockchain can change a transaction in any way they see fit. In the case of Bitcoin, this means that somebody can rewrite a Bitcoin transaction from their own personal computer or by using programs on the internet.
Although the changes are visible to anybody who is watching blockchain activity, it would be nearly impossible to identify the person responsible for writing the fraudulent data.
Another common vulnerability in blockchain technology is that the members of a network can sometimes be persuaded to join a separate network with different rules and regulations. The only way to guarantee that this won’t occur is if all of the blockchain’s users collectively agree on how the platform should operate.
However, this isn’t always possible because some blockchain users would disagree about how certain transactions should be logged or paid out.
Blockchain technology is constantly evolving and different types of attacks are constantly being developed and implemented. Despite its potential for incredible innovation, blockchain’s anonymity and decentralized nature can also make it easy to commit fraud.
Recovering from Fraudulent Transactions
One of the first things that cybercriminals do, after they’ve hacked a blockchain platform, is attempt to hide their activity. These hackers often try to delete their tracks by making small transactions or sending funds back to themselves. This can be done in a variety of ways. For instance, cybercriminals might make several small transfers between themselves and then include a single large transaction later on.
Since blockchain transactions are quickly verified by nodes on the network, it is almost impossible to catch these hackers red-handed. However, there are still a few ways that you can recover your stolen funds.
Firstly, the hacker might leave behind some kind of message. Any time a hacker makes a blockchain transaction, they must include a message that says what the payment was for. Since blockchain was originally used to exchange currency, it is easy to trace the source and destination of funds without knowing a person’s identity.
If you discover an odd message on your blockchain account or notice any unusual activity on your ledger, you should report this immediately. Exchanges like Coinbase and Bittrex are often very responsive when interacting with their customers. However, they cannot always provide help in every situation.
For more information on how you can secure your blockchain-related projects, reach out to us here.
Numen Cyber Labs is committed to facilitating the safe development of Web 3.0. We are dedicated to the security of the blockchain ecosystem, as well as operating systems & browser/mobile security. We regularly disseminate analyses on topics such as these, please stay tuned or visit our blog here for more!
This blog was originally published on our Medium Account.