Cryptocurrency markets

Why no one can hack blockchain

Why no one can hack blockchain
"Hacking" blockchain is nearly impossible, but what makes decentralized registries "unhackable"?

A common mistake that cryptocurrency newbie investors make is confusing blockchain hacking with digital exchange hacking. While, unfortunately, centralized digital exchanges are hacked more often than they should be, hacks of decentralized blockchains are very rare because they are difficult to implement and have little incentive to execute.

In this piece, we look at what makes blockchain used in the cryptocurrency sector immune to security breaches.
What makes blockchain resistant to hacks?

Decentralized and open-source protocols


The blockchains underlying most cryptocurrencies are peer-to-peer (P2P), open and public, allowing anyone with the necessary hardware and knowledge to look under the hood. This is important for increasing transparency and attracting buyers.

Blockchain incorporates various technological mechanisms that work together to achieve a common goal. For example, there are consensus mechanisms, such as Proof of Work (PoW) and Proof of Ownership (PoS), which protect the network by reducing cyberattacks by hackers.

The decentralized nature of blockchain means that its network is distributed among multiple computers, known as nodes. This eliminates a single point of failure. In other words, it is impossible to "cut off the head of the snake" - because there is no head.

The architecture of the blockchain determines how nodes interact when verifying a transaction before being committed to the protocol. In the case of Bitcoin and other PoW systems such as Bitcoin Cash, a minimum of 51% of nodes must agree to a transaction before it is accepted.
G7 standardizes CBDC projects

Why no one can hack blockchain

Hashing algorithm.


Each transaction is called a block, and connecting multiple transactions becomes a block chain. Notably, a block has cryptographic elements that make it unique. The network's hashing algorithm determines the details. For example, the Bitcoin blockchain uses a double SHA-256 hash function that takes transaction data and hashes/compresses it into a 256-bit hash.Because of the difficulty of addressing the hashed value, the transaction becomes inflexible. Each block in the chain contains a certain set of data from the previous block. Consequently, even if an attacker reverse-engineers a hash, the resulting block will be out of sync with the rest of the blocks because it will have a different output hash, causing the system to reject it.

51% Attacks are unlikely


The longer a blockchain has been around and the more new users it attracts, the less likely it is to be subject to a 51% attack because of its growing hash power.

Note that in order for a hacker to reconstruct the hash of a transaction, he must control at least 51% of the power of the blockchain.

At some point, this becomes prohibitively expensive. Therefore, given the size of established blockchains such as Ethereum and Bitcoin, this scenario is almost impossible.

What about quantum computing?


Another reason why it is even harder to hack a blockchain is that if a re-hashed block is in the middle of the chain, the attacker would have to re-hash the previous blocks to align their historical label with the new block.

For Bitcoin, this is only possible with next-generation quantum computing, which currently does not exist. And even when that happens, who's to say there won't be a blockchain-based quantum security mechanism to mitigate quantum attacks?

PoS hacks


In PoS-based systems, rates determine the strength of the network. To clarify, this means that those users who have delegated or actively blocked their own blockchain assets are involved in processing transactions and finding new blocks. In such systems, an attack occurs when the hacker controls most of the share.

This is possible when the hacker accumulates more than 51% of all coins in circulation. For authoritative networks such as the emerging Ethereum 2.0 platform, this is nearly impossible. Imagine trying to find the funds to buy 51% of ETH's current market capitalization of $68 billion!

The economics of 51%.


You can't orchestrate a covert 51% attack without creating too much of a deficit, because buying the coins will dramatically increase the value available to incredibly high levels. Conversely, when blockchain participants find out that you own most of the coins, they are likely to sell their assets, thereby crashing the market due to oversupply. Thus, you will end up buying expensive and selling cheap!

How then does a blockchain get hacked? Answer: Hash rate


Good question. It all comes down to the strength of the network. Notable victims of 51% attacks include Ethereum Classic, Bitcoin Gold, Electroneum and Grin. The Ethereum Classic network uses the PoW consensus algorithm. Although Bitcoin uses the same algorithm, ETC has a much smaller number of nodes and miners securing the system. Thus, it has less computing power, making it easier for an attacker to control.ETC has a hash rate of 1.6 ter hash per second, while Bitcoin has a hash rate of 117.9 exa hash per second.

The future of blockchain hacks


So far, no one has hacked the blockchain alone. Instead, it is usually a group of attackers or a core team of developers who collaborate to crack the security of the blockchain. However, as blockchain platforms become stronger with more nodes or stackers, the possibility of a decentralized network being hacked gets closer and closer to zero.

In addition, newer blockchain systems use scientifically proven methods and would require highly specialized quantum computers to crack them.

To summarize - if you ever hear someone say "blockchain has been hacked!" you now have an argument to (politely) correct them and object.

Author’s Posts

Image

Download Our Mobile App

Image
Image