The concepts behind blockchain technology make it nearly impossible to hack a blockchain. However, there are weaknesses outside the blockchain that create opportunities for thieves.
Hackers can access cryptocurrency wallets and exchange accounts of cryptocurrency owners to steal cryptocurrency.The attacker, who controls most of the mining power, can make the fork the authorized version of the chain and proceed to spend the same cryptocurrency again.
More and more security holes are appearing on cryptocurrency and smart contract platforms, and some are fundamental to the way they were created. Investigations at Chainalysis, a company that tracks cryptocurrency transactions for both private companies and government agencies. But it gets much cheaper quickly as you move up the list of the more than 1,500 cryptocurrencies that exist. This would encourage people to report flaws in exchange for a cryptocurrency reward, says Philip Daian, a researcher at Cornell University's Cryptocurrency and Contracts Initiative.
However, governments have tried to ban cryptocurrencies before, or at least restrict their use in their respective jurisdictions. Earlier this month, the company in charge of Zcash, a cryptocurrency that uses extremely complicated mathematics to allow users to transact privately, revealed that it had secretly corrected a “subtle cryptographic flaw” accidentally incorporated into the protocol. Earlier last month, the Coinbase security team noticed that something strange was happening in Ethereum Classic, one of the cryptocurrencies that people can buy and sell using the popular Coinbase exchange platform. But last year, amid a Cambrian explosion of new cryptocurrency projects, we began to see what this means in practice and what these inherent weaknesses could mean for the future of blockchains and digital assets.
Cryptocurrencies generally offer some security, taking their name, in part, from “encryption”. In addition, business and technology lawyers will undoubtedly find cryptocurrency or other blockchain technology in some of their cases. Most of the security discrepancies in the cryptocurrency space can be attributed to people and websites that don't take the right precautionary measures. Exchanges often keep access to some of their cryptocurrencies in so-called cold wallets, which live securely offline.
Cryptocurrencies, once an Internet rarity that required a certain level of technological knowledge to buy, have become a more popular investment and speculation tool, prompting more than 300 companies to create in recent years to offer people an easy way to buy and sell of everything from bitcoins to more “marginal” alternative currencies, such as the dog-inspired Dogecoin. Still, most of the recent headline-grabbing hacks weren't attacks on blockchains themselves, but on stock exchanges, the websites where people can buy, trade and hold cryptocurrencies.