Can Blockchain Be Hacked? Lessons from Real-World Incidents

If this is possible, has any security breach been successful? What could be the possible vulnerabilities? How can developers learn from the past and prevent future recurrence? All this and more, are the issues this article will discuss. Before answering if blockchain is safe from hackers, it is important to examine basic blockchain security.

Understanding Blockchain Security

In a previous article, we discussed blockchain infrastructure. While that post focused more on how blockchain processes information, it also gave insight into how the technology ensures data safety. That post mentioned blockchain as a decentralized ledger, which also plays a significant role in network safety.

By being decentralized, this technology deters cybercriminals from trying. With central systems, the hacker can access the entire network once they bypass security. In this case, bypassing security only grants access to one part of the vault.

Besides decentralization, the article highlighted the “consensus mechanism” – another safety-related factor. The consensus mechanism is the standard that governs data transfer and storage on a blockchain. Since there is no central authority in a decentralized network, The participants agree on a process for exchanging and securing data, which is where this mechanism comes into play.

Finally, we also discussed cryptographic hashing in that article. Hashing verifies data and creates digital signatures before recent information is added to the blockchain. In simpler terms, think of it as giving every blockchain transaction its unique identity before adding it to the chain as a block.

The catch here is every blockchain transaction must have fixed-sized stringed hashes regardless of their data size. With knowledge of blockchain security now understood, let’s examine theoretical scenarios of blockchain hacks.

Can Blockchain Be Hacked: Exploring Theoretical Vulnerabilities

While blockchain technology is infallible, the humans who create these networks aren’t. As a result, people with malicious intent will exploit possible vulnerabilities in a decentralized network.

Below are some 

51% Node Control Attack

One area often exploited is the consensus mechanism – the standard for defining information transfer and storage. When developing a decentralized network, developers understand that people are different and may not all agree in decision-making. As such, creating a system that requires all the participants to agree to a specific solution may not be feasible.

To compensate for this, they create a system that enables efficient decision-making. A common option is the 51% consensus, which activates a smart contract once more than half of the participants vote in favor of a decision. This is considered democratic, as it recognizes the interests of the majority. More so, it is easier to reach a 51% consensus, than say a 75% consensus.

The drawback of this approach is that it exposes the blockchain to security risks. If hackers can get control of 51% of the nodes governing the network, they can decide for the entire network.

Smart Contract Bugs

Another vulnerability that involves human vulnerability is smart contracts with bugs. Smart contracts are self-executing protocols that take effect when the parties involved reach specific requirements. In addition, transactions done via this feature are irreversible, and changing a smart contract requires a hard fork.

Considering their significant importance, any programming mistake can have damning consequences. Weak randomness is a good example, as certain blockchain features like node selection for transaction processing or airdrop distribution depend on complete randomness.

A smart contract with weak randomness becomes predictable and enables hackers to manipulate the outcome of on-chain activities. For example, they can raid airdrop distribution by creating multiple wallets that will most likely receive the airdrop. Your actual community members may not receive any token and this can create significant distrust

Private Key Theft (Phishing)

This is used to target individual or corporate accounts, as blockchain data (digital assets in this case) are stored in a central medium. To foster decentralization, blockchain technology grants users maximum custody of their assets. While control is a blockchain tenet, it comes with several security risks, that put the safety of one’s bitcoin and other cryptocurrencies at risk.

Hackers often clone websites to look like the actual thing and fool people into providing their login information. A good example is Metamask, which requires users to enter their private key when accessing their account with a new device or browser. Cybercriminals will simulate this process and fool people into providing their private keys.

The hackers will then use these private keys to access the account and steal digital assets. If the wallet owner is also a node operator, this is an avenue to access and influence blockchain activity.

Can Blockchain Be Hacked: Real-World Incidents of Compromise

Can Bitcoin and other cryptocurrencies be hacked?? Yes, and we’re not just talking about the theoretical aspects. There have been several incidents whereby decentralized networks have been compromised.

Some successful cyberattacks are briefly explained below:

• The DAO Attack (Ethereum): In 2016, a hacker exploited a reentrancy vulnerability in The DAO’s smart contract, allowing recursive withdrawals that drained ~$60M worth of ETH. The flaw occurred because the code executed external calls before updating balances, enabling the attacker to repeatedly siphon funds. Ethereum later hard-forked to reverse the transaction, splitting the chain into Ethereum and Ethereum Classic.
• The Mt. Gox Hack (Bitcoin): Mt. Gox, a major Bitcoin exchange, collapsed in 2014 after hackers stole ~850,000 BTC (then $460M) due to poor security: outdated software, weak authentication, and storing funds in a vulnerable “hot wallet.” Attackers exploited Bitcoin’s transaction malleability to falsify transaction IDs, tricking the platform into releasing funds without proper confirmation.
• The Poly Network Hack (Cross-Chain Platform): In 2021, a hacker stole $600M from Poly Network’s cross-chain protocols by exploiting a logic flaw in its smart contracts, enabling unauthorized transfers across blockchains. The attacker manipulated ownership checks and fund routing. However, the hacker returned the funds after negotiations, likely due to scrutiny and a lack of exit routes. The flaw highlighted risks in complex cross-chain interoperability code.

Can Blockchain Be Hacked: Mitigating Risks and Strengthening Security

While there are possible risks, blockchain remains a disruptive technology with outstanding potential. Developers will enjoy numerous advantages if they can prevent possible vulnerabilities and strengthen security.

Here are some vital strategies to enhance blockchain security:

• Regularly audits: Blockchain firms should frequently audit their network and associated smart contracts where applicable. Audits can help identify potential vulnerabilities while giving possible ideas for fixing them.

• Multi-signature wallets: Blockchain wallets should have multi-signature or 2-factor authentication functions. This additional protective measure can save an unsuspecting user from being exploited.

• Improved user education: The system is only as secure as those using it. This is why web3 outfits must prioritize educating their community members. Focus on simplifying content/posts to people’s understanding rather than sounding “professional.

Can Blockchain Be Hacked? How is Tectum Staying Ahead of the Security Curve?

Tectum understands that blockchain can be hacked, hence, we are taking significant steps to prevent this from occurring. One way we ensure security is by implementing zero-knowledge proofs into the blockchain. This ensures that the network does not share private information, even when interacting with other decentralized networks or orthodox systems.

Furthermore, we launched Tectum 4.0 to ensure decentralization and improve on the prior architectural network. The team also released the Tectum Node to enable users to participate in the new blockchain. Plans are already underway to implement a new consensus mechanism to further strengthen on-chain integrity.

Still on security, Tectum launched send protection to SoftNote. This feature demands that users enter a one-time password that will be sent to their email to authorize cryptocurrency transactions in the SoftNote Wallet. Should a cybercriminal successfully access your account, they must still provide that OTP to steal or send your funds.

Finally, we still prioritize user education. This is why we constantly post educational content on the Tectum Blog and SoftNote News sections to provide our community with factual information about the industry. In addition, we are launching Tectum Education to provide first-hand details about products and services in our ecosystem.