Once Hailed as Unhackable, Blockchains are Now Being Hacked

As the use of Distributed Ledger Technology (DLT) based on blockchain grows, it is worth returning to an old story reported in an MIT Technology Review in February 2019.

It reported a hack of Ethereum Classic, a cryptocurrency traded on Coinbase’s exchange platform. The attackers had gained control of over half the network’s computing power and were trying to rewrite the transaction history. The aim was to be able to send the same cryptocurrency more than once.

On that occasion no currency was stolen, but the article lays out the seldom talked about vulnerabilities of blockchain and DLT. Whether a cryptocurrency, another asset type or a Central Bank Digital Currency, the security challenge is significant and real.

Vulnerabilities

The first potential weakness lies in the nodes. There is a risk that the node operators might attack the network for personal gain rather than working to secure it. To stop that, a mixture of cryptography, game theory and economics is used to incentivise them to protect it.