Every day, crypto projects are under attack. With larger ecosystem adoption fueled by the growing support of decentralized finance (Defi), new projects and investors find out that flawed codes, human errors, and bugs can cost them millions of dollars. In the past, for hackers to benefit financially from malicious actions, they had to find private information and then ask the owners for ransomware. Now, hackers can easily rob the bank of the internet through exploiting insecure or flawed crypto currencies. Today, more than ever, it is possible to access and manipulate crypto markets. With crypto assets, it has become easier to access millions of dollars from the comfort of their computer. That is why it is extremely important to stay educated and understand the potential dangers of crypto currency for any token holder.
Here are 3 of the most popular and devastating attacks in crypto history:
This type of attack often occurs due to poor coding and vulnerabilities in the smart contract developed by the developer. Although this attack is not as common as it used to be in the past, re-entrancy became known in the early days of crypto during the DAO hack in 2016. Re-entrancy is a type of attack where the aggressor can withdraw more than their current available balance, and the new changes won’t update. For example, let’s say you have $500, and you withdraw $100, the balance will still show as $500, allowing you to withdraw as many times as you’d like. The DAO hack occurred in the early days of Ethereum, resulting in an attack of over 50 million dollars. While some funds were recovered, the damage was done, resulting in the hard fork of Ethereum. The DAO attack changed the course of crypto and emphasized the importance of crypto security.
We must remember that the way Blockchains stay decentralized is by having a public ledger where many nodes (computers) can mine cryptocurrency and make changes in the consensus protocol if most of the nodes agree. A 51% attack is when a miner or group of miners, takes control of most of the computational power, meaning they can choose which transactions will be approved, in what order they should be approved, ignore beneficial transactions, and allow malicious transactions in the network. Malicious transactions can create “double-spend” which means the attacker can spend more tokens than what they currently own.
Many crypto currency projects such as Ethereum Classic, Bitcoin Gold, and recently Bitcoin Satoshi's Vision have been victims of 51% attacks, showing the popularity of this attack vector. Earlier this month, Bitcoin Satoshi's Vision suffered a 51% attack, where the attacker reorganized dozens of blocks and 3 versions of the chain were mined simultaneously across pools with the purpose of double spending. The popularity of this attack shows the importance of crypto security and understanding the many vulnerabilities of different blockchains.
Flash Loan Attack
The flash loan attack is one of the most popular attacks in Defi, as it requires no capital, involves little risk on the hacker’s side, and often happens in a matter of seconds. The concept of flash loan was popularized by the decentralized protocol AVEE, which allowed you to get a loan without collateral as long as you paid back the loan within the same set of transactions submitted to the blockchain within a specific block. The smart contract was created to allow traders to take advantage of arbitrage opportunities and make money from the swaps from one planform to the other. If the money is not returned within the certain block time, the transaction will be reversed as if it was never submitted. Flash loans are particularly attractive to attackers because they are a lot cheaper to perform compared to price manipulation attacks or acquiring enough computer power for POW attacks.
One example of this attack vector is to take a flash loan for a large sum of crypto assets, then use it to manipulate the price of a different crypto asset in order to avoid paying the loan in full. Another way is to introduce complexity into the specific transactions submitted in order to “confuse” the smart contract and make it seem as if the loan amount has been paid even if it has not. Flash loans are still very new, and it will take some time for protocols to learn how to mitigate these risks completely. In the meantime, it is crucial to stay educated and track unusual activity in your assets.
Historical crypto attacks show that Blockchain is often insecure and human errors can cause permanent loss of funds. We are still very early in crypto to fully acknowledge and solve every single vulnerability, but we can use past attacks as lessons. The hardest part about detecting vulnerabilities in the Blockchain is that there are hundreds of different Blockchains, and every Blockchain contains unique vulnerabilities that are often detected only once an attack has taken place. The best way to protect yourself from attacks is by educating yourself about the risk of your assets and using tools that will allow you to identify vulnerabilities before they are utilized.
Valid Data provides real-time insights that are used by cryptocurrency traders and exchanges, as well as investors and hedge funds, to make better investment and trading decisions, to protect the value of their digital assets, and to capitalize on market opportunities that only Valid Network’s technology can uncover. Check Valid Data for more information about the security of your favorite assets.
The crypto ecosystem is an exciting market. With over 200 million users worldwide, crypto currencies have become the new Wild West, where everyone is looking to maximize profits, but few understand the security behind Blockchain technology.
Blockchain is an exciting and innovative area, and unlike other nascent technologies, blockchain comes with substantive progress in its brief history, with greater exposure to wider audiences. However, there are also bad actors who are attracted to the ecosystem who try and identify potential Vulnerabilities and exploit these in a way that will allow them to generate a financial gain.
The crypto currency space is still very new and immature when it comes to security measures. Hackers are performing complex and continuous attacks, costing projects and investors millions of dollars every year. Here are 3 crypto currency attacks that changed the future of Blockchain and crypto security.