Blockchain and cryptocurrencies are attracting an increasing number of cyberattacks alongside their growing popularity. Though blockchain technology itself remains secure, the developments around it, such as wallets, exchanges, and smart contracts, are riddled with risks. Knowing these dangers allows users to be careful and developers to create more secure systems.
What Are Security Risks in Crypto?
Security risks in crypto are vulnerabilities that attackers can exploit to steal money or harm the system. These risks often arise from poorly written code, mistakes made by people, unprotected wallets, and the release of bridges and exchanges that may be susceptible to attacks.
- Some of the riskiest sources of behavior are:
- Incorrectly writing a smart contract
- Storing private keys insecurely
- Using weak DeFi protocols
- Visiting fake websites and downloading apps
- Being scammed in social engineering
- Although blockchains are secure, their surrounding ecosystem is not immune to attacks.
Major Crypto-Attack Vectors (How Hackers Attack)
Smart Contract Vulnerabilities
Smart contracts are self-executing programs on the blockchain. If there is an error in the code, hackers may exploit it to take money.
Most common problems are:
- Errors in logic
- The absence of protective measures
- Reentrancy attacks (repeatedly calling a function to empty the account)
- Most of the attacks on DeFi platforms are because they store a large volume of crypto.
Phishing and Social Engineering
Phishing is a method in which hackers deceive you into giving them your private keys or seed phrase.
They could present:
Phony wallet sites
- Phony customer support accounts
- Phony airdrops
- Phony giveaway messages
- If you put your seed phrase in any location, you are wiped out.
Private Key Theft
Your private key is the most valuable part of your crypto wallet. If somebody gets hold of it, they are able to take the full control of your wallet.
Theft of keys can be done via:
- Malware and viruses
- Keyloggers
- Falsified browser extensiions
- Insufficient device security
- An excellent hardware wallet will practically eliminate that risk.
Exchange and Wallet Hacks
Centralized exchanges plus online (hot) wallets are attractive targets because of the large sums of crypto they hold.
Break-ins usually take place due to:
- Inadequate server security
- Attacks by insiders
- System configuration errors
- Bad storage methods
- If an exchange is forced open, its users’ funds are the ones that will be lost forever.
Cross-Chain Bridge Attacks
Bridges enable users to transfer tokens from one blockchain to another. However, due to their complexity, they are also vulnerable to attacks.
Attackers may aim at:
- The confirming process
- Validator nodes
- The software bugs
- Some of the largest crypto hacks trace back to bridge attacks.
Rug Pulls and Scam Tokens
A rug pull happens when developers fabricate a project, take the investors’ money, and vanish.
These frauds abound in:
- Meme tokens
- New DeFi projects
- Small-cap altcoins
- Scam tokens usually promise that investing in them will yield high returns, but in reality, they are just empty projects.
51% Attacks
If one entity has control over more than 50 percent of a blockchain’s mining or validation power, that entity can manipulate transactions.
This gives them the capacity to:
- Reverse transactions
- Double-spending
- Block new transactions
- This is quite unlikely to happen on large networks such as Bitcoin, but is feasible on smaller ones.
Sybil Attacks
When a single person creates a number of fake identities or nodes with the aim of influencing a network, this is known as a Sybil attack.
These fake accounts may:
- Manipulate DAO voting
- Interrupt peer-to-peer networks
- Broadcast fake information across the network
- Open and permissionless systems are more susceptible to this type of attack.
How to Protect Yourself in the Crypto World
Tips for Crypto Users
- Get a hardware wallet
- Do not reveal your seed phrase to anyone
- Confirm the names of websites and apps twice
- Do not click on suspicious links
- Learn about a project before putting your money in it
Tips for Crypto Developers
- Conduct smart contract audits
- Secure and tested libraries should be used
- Follow safe coding practices
- By testing everything beforehand
- Enable the use of strong verification tools
Why Good Security Is Important
The same as the crypto market, the threats are also growing. More and more hacker moneypots are the new trending technologies like DeFi, NFTs, Web3 apps, and cross-chain systems. Good security creates a strong bond of trust between users, offers protection to them, and makes the crypto ecosystem develop in a safe manner.
