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Approximately 57 cryptocurrency thefts occurred in just the first quarter of 2023, echoing similarly disastrous results in 2022, when fraudsters relied on a wide variety of techniques to steal $3.8 billion in cryptocurrency. The perception of vulnerabilities with blockchain-based currency have led to a dramatic drop in the total value of cryptocurrency, whose worth has fallen from over $2 trillion at the beginning of 2022 to just over $820 billion by the end of that year. Attacks range from confidentiality breaches to compromised “smart contracts,” leading to a need to redefine the nature of digital security. Below are just a few of the biggest threats to watch out for.
Threats towards consensus protocols
Consensus protocols are placed to prevent one single person from controlling an entire blockchain. Multiple people must reach an agreement to decide what a blockchain should contain at a given moment. All consensus protocols require numerous security features in order to protect themselves against ARP and DDoS attacks. Address Resolution Protocol (ARP) spoofing tricks devices into sending messages to the hacker instead of the intended destination. On the other hand, Distributed Denial of Service attacks are malicious attempts to disrupt an individual's network traffic by overwhelming the target with a flood of internet traffic.
Privacy and confidentiality breaches
Blockchains are also vulnerable to the exposure of private and sensitive data. They are designed to be transparent, providing users with as much knowledge about their transaction as possible. However, attackers can take advantage of this transparency, and access and share confidential information. Part of the appeal of digital currencies is the anonymity of participants. The possibility of tracing transactions to individuals results in the disclosure of private information, disincentivizing users from utilizing digital currencies instead of their physical counterparts.
Private key improvisation
In cryptocurrency, keys are used to authorize transactions, access wallets, and prove ownership of assets. They are encrypted to protect users from theft and unauthorized access to their funds. However, some 23 private keys with a total value of over $900 million were compromised in 2022. The two main ways in which keys are illegitimately accessed are through social engineering and malicious software. For example, keyloggers record every single input that users make with their keyboard. When a user types their private key while a keylogger is active on their device, the hacker obtains access to it.
Risks during exchanges
Cryptocurrency exchange platforms allow users to purchase and sell digital assets. They function as a “middleman”, connecting two users in a trade. This makes them one of the most common targets for cybercriminals, as is evident in the relatively recent FTX hacking claims, in which this exchange claimed that almost $0.5 billion had been removed in unauthorized transactions. Although this type of attack is rare, cybercriminals have intercepted transactions in the past, replacing existing exchange platforms, so that funds are transferred to them instead of to authorized recipients.
Cybercriminals can also create outright fake platforms that disguise themselves as authentic applications with fake reviews and offers. When partaking in a digital trade, make sure you use secure cryptocurrency exchange services. The anonymity regarding blockchains makes it exceptionally difficult to track cybercriminals and seek justice.
Defects in smart contracts
Smart contracts on the blockchain are apps that complete each side of a transaction. Those involving fund transfers can include a third party that verifies that the transfer took place successfully. They are based on templates, however, meaning that they cannot be amended for a particular use. Their code is extremely complex, making it near impossible to identify potential security risks. This can be seen as a benefit and a drawback since it is more difficult to discover vulnerabilities as a hacker and as a coder.
Cybersecurity and blockchain
Cybersecurity has proven itself to be a core feature of the blockchain, since the increase in cryptocurrency attacks has led to a colossal drop in the value of digital currencies. Features such as consensus protocols, implemented to make the blockchain safer, have become weak points themselves and have facilitated access to private and sensitive information. Cybercriminals are also infecting devices with malicious software to illegitimately access private keys and wallets.