This article is educational for those that thought blockchains were immutable. Of course, the 51% attack is a known threat vector for Bitcoin and other similarly designed crypto platforms. It is interesting to note that as the number of miners goes down, the risk of a hack goes up.
The problem of course is that you can never be sure how many miners are good guys versus criminals. For other blockchain implementations, such as Ethereum, different vectors of attack have been used such as with the DAO and there are probably many more yet to be discovered.
A large population of crypto enthusiasts trusts decentralized blockchains because they eliminate centralized control. The hacks we have seen suggests that private blockchains operated by trusted entities, perhaps 10,000 banks worldwide, would offer greater stability and trust:
“Just a year ago, this nightmare scenario was mostly theoretical. But the so-called 51% attack against Ethereum Classic was just the latest in a series of recent attacks on blockchains that have heightened the stakes for the nascent industry.
In total, hackers have stolen nearly $2 billion worth of cryptocurrency since the beginning of 2017, mostly from exchanges, and that’s just what has been revealed publicly. These are not just opportunistic lone attackers, either. Sophisticated cybercrime organizations are now doing it too: analytics firm Chainalysis recently said that just two groups, both of which are apparently still active, may have stolen a combined $1 billion from exchanges.
We shouldn’t be surprised. Blockchains are particularly attractive to thieves because fraudulent transactions can’t be reversed as they often can be in the traditional financial system. Besides that, we’ve long known that just as blockchains have unique security features, they have unique vulnerabilities. Marketing slogans and headlines that called the technology “unhackable” were dead wrong.
That’s been understood, at least in theory, since Bitcoin emerged a decade ago. But in the past year, amidst a Cambrian explosion of new cryptocurrency projects, we’ve started to see what this means in practice—and what these inherent weaknesses could mean for the future of blockchains and digital assets.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group