Blockchain security is an important issue that requires attention, as events over the past year and a half have diverted focus away from it. 2022 brought significant damage to the crypto community through monetary losses, compromised safety of financial assets, and fraud. When adopting blockchain technology, businesses and investors must consider security issues like 51% attacks, flash loan attacks, coding loopholes, and centralization of information in decentralized systems. 51% attacks allow hackers to reverse transactions by gaining control over more than half of a blockchain's processing power, while flash loan attacks manipulate token values to profit from arbitrage and launder funds. Centralization and coding flaws make blockchains more vulnerable to hacking of private keys or external information sources.

1. By:
www.ProfitableInvestingTips.com

2. As the blockchain grows in significance and
myriad of uses, new users need to attend
to security as an important factor. We are
concerned that events of the last year and
a half have diverted attention away from
this issue. 2022 and crypto winter brought
a lot of damage to the crypto community.

3. Most of the focus on crypto and other uses of
blockchain has had to do with monetary loss,
safety of financial assets, and even out and
out fraud by some of the crypto robber
barons. For anyone who is adopting
blockchain technology for their business,
think once and then twice. Is your blockchain
secure? Anyone investing in cryptocurrencies
or decentralized finances businesses needs
to have the same concerns.

4. What Security Issues Come with the
Blockchain?

5. Last year we wrote about the anatomy of a
blockchain DeFi hack. Although such
issues have taken a back seat recently to
issues of crypto and DeFi regulation, they
are still very important. The sorts of things
to concern yourself with in this arena are
51% attacks, flash loan attacks, loopholes
in coding, and centralization of information
in what are supposed to be decentralized
systems.

6. What Are 51% Attacks?

7. Decentralized design of a blockchain (as
opposed to centralized design) can lead to
what is called a 51% attack. Verification of
information processed and stored in a
blockchain relies on consensus throughout
the system. In a system using a “proof-of-
work” standard, anyone who controls more
than half of the system (51%) can be
totally in charge.

8. In a permissionless blockchain system
where hash rates are low this can be a
particular issue. A successful 51% attack
lets the hackers invalidate new
transactions, modify new blocks and even
reverse old transactions. Causing double
spending in a system is a common goal of
a 51% attack. The hackers collect crypto
assets and never touch embedded wallets
in the system.

9. Even name players in crypto like Ethereum
Classic, Bitcoin Cash and Bitcoin Cash
ABC have been hit by this kind of attack.
Methods that have been successful in
blocking these sorts of attacks include
using proof-of-work system blind
signatures. On proof-of-stake systems a
method that has worked is to lock a
sufficient percentage of funds to make
majority control practically impossible.

11. Beware of Flash Loan Attacks

12. Something that may be helped by upcoming
anti-money-laundering rules are flash loan
attacks. A problem with many DeFi
systems is that their know-your-customer
rules are lax and loosely enforced. This
tends to let folks into the system that you
would prefer were not there. Smart loan
networks that are highly leveraged and
provide non-collateralized loans can be
prone to this problem.

13. What the attackers do is find loopholes
where they manipulate token values. They
effectively do crypto arbitrage and make
off with profits that they then transfer to
other networks in an attempt to launder
their ill-gotten gains. Such attacks have
made off with millions of dollars in crypto
assets.

14. The most famous was the PancakeBunny
hack which made off with close to
$200,000,000 in crypto assets. The take
home lesson for that one was to make
sure that your coding is airtight before
going into business with it!

15. Blockchain Coding Loopholes

16. The more centralized a blockchain is the
more vulnerable it is when the coding is
not airtight. They saw that problem at
PancakeBunny but the issue exists with all
blockchains. Hackers typically target those
who have private keys for a system. They
can then take assets from wallets within
that system.

17. Another issue with centralized systems is
that they use external sources for some of
their information and/or processing. In
such cases they are not in charge of the
code but rather the external source is and
a hack of that entity can lead to access of
the home blockchain causing significant
losses.

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