Bitcoin and other cryptocurrencies are lauded for their security and the high level of encryption that protects transactions. Blockchain technology is largely regarded as being threat-proof, although recent hacks, attacks and thefts have proven that even vaunted blockchain technology cannot prevent determined attackers.
For those interested in investing in bitcoin, or another cryptocurrency, security and protection should be top priorities to consider. After all, if your entire investment could be wiped out within a millisecond by a hacker, perhaps your money would be better put somewhere else. Part of being a responsible investor is understanding the risks that apply to your chosen investment, and that means knowing a little about the most likely attacks possible with bitcoin.
The infamous 51% hack has never actually occurred, although fears are on the rise. In this attack, a mining operation would be able to gain 51% of the network’s hashing power. This would allow them to exploit a number of vulnerabilities.
Perhaps the single largest threat that bitcoin buyers face is potential bitcoin wallet theft. In the early days, wallets were not encrypted by default, and this left investors at risk. Today, many wallets offer encryption, but the feature is not on by default, meaning that it is up to the user to opt in for this type of protection. Failing to do so, or being ignorant of the need to do so, puts the contents of the wallet at risk.
Coin History Tracing
It is possible to trace a cryptocoin’s history. This would theoretically allow a hacker to connect identities to addresses. This is not so much a potential attack, as it would be a breach of privacy and anonymity that might ultimately lead to theft.
A Sybil attack relies on filling a network with hacker-controlled clients. Actual human users would then be very likely to connect to a compromised client. This can allow attackers to refuse to relay blocks and transactions, relay only blocks created by the attacker, filter out specific transactions to execute double-spending attacks, or use timing attacks to defeat some types of encryption.
Packet sniffing is a technique that allows an attacker to “see” transactions that are not received (which means they were likely sent by the user). Those transactions can then be intercepted.
DoS, or denial of service, attacks are becoming more and more common with bitcoin and other crypto networks. This is the process of inundating nodes with so much data that it becomes impossible to process standard transactions.
Clock drift is a type of timejacking attack that creates inaccurate timestamps during node connection, which allows an attacker to change the time counter within a node and accept fake block chains.
Some content types are illegal in some nations. Many bitcoin transactions contain arbitrary data that may fall into the category of illegal content. Attackers can attempt to use steganographic embedding to place illegal data within transactions.
Security Vulnerabilities and Bugs
As with all other software, bitcoin and other cryptocurrencies are subject to security vulnerabilities and bugs not found prior to the rollout of new software versions. However, this is one of the least likely exploits an attacker might use.
Hackers are able to match mining activities with increased energy consumption from the local power grid. This allows them to home in on areas of higher mining intensity, and focus their efforts.
These are just a few of the most likely possible attacks on bitcoin. There are many others, although they are far less likely. Scalability can be used as an avenue of attack, as can cryptography breaking, segmentation, all-user attacks, transaction dropping, transaction spamming, and numerous others.