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Tuesday, April 13, 2021

Billions Lost In Blockchain Hacks

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Blockchain; on one hand it’s touted as the finance and exchange technology of the future. On the other hand it’s viewed with tremendous skepticism. Powerful captains of industry have thrown their weight behind this technology – Tesla’s Elon Musk and Twitter’s Jack Dorsey have both supported Blockchain’s biggest success story – Bitcoin.  In addition to this, blockchain technology has availed itself as a next-generation communication conduit that could replace the exchange protocols that typically make transactions possible between banks. It should also be noted that blockchain technology stands to extend itself to automotive technology as well as various PC and tablet applications that make it possible for the user to to get an immediate result while also safeguarding the exchange of sensitive information.

Those are some of the key perks of the technology responsible for the various cryptocurrencies we now find ourselves inundated with. Almost always technology has proven to be a force for good and for bad. The onus is on us as the people who wield it, to do so responsibly. Blockchain technology has proven to be no different in this regard. Despite being seen as a major and potential upcoming player in e-commerce and other online endeavours, it has also been used to fulfil nefarious deeds such as the sale of illegal drugs and hacks (theft) to the tune of $15 billion in 2020 alone!

Crypto crimes in the Billions

Blockchain and it’s biggest creation, Bitcoin, was born of a need for greater privacy and the absence of regulatory bodies inherent in the banking system and affiliated financial frameworks. As the technology has grown and evolved, associated industries have evolved in conjunction with it.  It’s proliferation thus far has been such that many online traders now look to spread betting and investing in blockchain companies. However, such endeavours are done in a regulated space in which the people and companies involved can be held accountable. 

Last year in 2020 crypto crime hacks amounted to a staggering $3.8 billion, which believe or not, was $200 million less than the losses incurred in 2019 – those were $4 billion in total! According to CipherTrace, a Silicon Valley based cryptocurrency intelligence firm, 2019 proved to be the year of the “exit scam.” Quite simply put, an exit scam involves the launching of a new cryptocurrency on the premise of a new concept.  The concept is often supported by a “white paper” – a document that goes into great depth about said concept and thus adds the “so-called” required credibility.  Money is then procured through investors by way of an Initial Coin Offering (ICO) after which the scammers close up shop and make off with the loot.

Blockchain Technology Might Need to Play ball

While cryptocrimes in 2020 amounted to a sum of $3.8 billion, overall blockchain hacks for the same year amounted to a staggering $15 billion. CertiK, a company that provides end-to-end solutions for blockchain projects, analysed a total of 21 blockchain projects to ascertain how such hacks were carried out.  Their findings entailed a total loss of $200 million ( the tip of the iceberg) done by way of various attack methods that included wallet attacks, project party fraud, lighnting loan attacks, implementation logic errors, re-entry attacks and price oracle manipulation.  Hacking happens within the framework of computer science, the universal language of all programming, thus making blockchain technology susceptible to it. One of the biggest problems facing blockchain is support and auditing. Most “conventional” security protocols are supported through regulated or audited companies.  If Blockchain technology wants to survive, and it can, it’s going to have to make some major concessions.  Adapt or die?

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