The short answer is no. Blockchain can’t be hacked. However, it is theoretically possible and some attacks were even completed in the past, but this new technology is becoming more secure by the minute.
It is estimated that 10% of global wealth will be on Blockchain in less than ten years from now, and investment firms dealing with Blockchain do not want to find themselves unprepared.
Blockchain puts too many pros on the table to give it up, so working on its security is one of the top priorities of the IT industry all over the world.
We are not talking about Blockchain compliance or any potential criminal uses, because there are already a lot of measures and regulations that make sure all AML and anti-terrorism requirements are met, with the FATF monitoring the situation. We are talking about cybersecurity of the system: is it possible to exclude any intruders and malicious manipulations?
We know that Blockchain is immutable and encrypted, but due to its nature, there are some ways to attack the system and exploit its vulnerabilities. Let’s see what they are, and then we will talk about real chances they can happen.
How Blockchain could be hacked
The most effective way to attack a blockchain and take control of it is a 51% attack. It is based on a simple principle: Blockchain is secure because no one can double-spend or credit funds to themselves, because the ledger is distributed to all the members on the network, and any manipulation would be instantly detected. Unless you can manipulate at least 51% of the network.
This kind of attack happened on the Ethereum blockchain, where a group of hackers were able to double spend over a million dollars in Ethereum.
Another episode happened on the Zen network in 2018, when over 20,000 ZEN were double-spent as a result of a 51% attack on the ZenCash blockchain.
According to Boston’s MIT, 51% attack is the most dangerous threat for a blockchain, and it can have serious consequences on smart contracts.
Another kind of attack, the Sybil attack, involves taking control of a sufficiently high number of knots on a blockchain in order to flood the network with wrong transactions and manipulating the legitimate ones. The attack can be carried out either hacking the existing knots or creating fake ones.
With a high number of knots, attackers can reject transactions and can potentially paralyse the network.
Why it cannot happen
Hacking Blockchain, however, is extremely costly, when not too complicated. ZenCash was hacked because the distributed ledger probably was… not enough distributed.
The reason why a 51% attack never happened on the Bitcon blockchain is that its cost would not be sustainable. The wider and more decentralised a network is, the more mining power you need to control the 51% of it.
According to Crypto51, conducting just one hour of 51% attack on Bitcoin would cost over 300 thousand dollars.
The high cost is the same reason why Sybil attacks won’t happen on Bitcoin: in order to outnumber the legitimate identities on the network, a hacker should generate thousands of fake identities, but the high cost of this operation makes this kind of attack extremely unlikely.
This means that the more expensive identities are, the less likely the blockchain is to suffer a Sybil attack. This does not mean that cheaper blockchains are exposed to this kind of attack: setting some rules and carrying out reputation checks can make sure that only honest users enter the network, and limits to the Proof of Work mechanism can block suspicious activity.
Is Blockchain safe?
In the end, yes, Blockchain is safe. The key to enhancing its security, even more, is implementing it on a massive scale.