Creating Investor Awareness: Exploring the Vulnerabilities of Cryptocurrencies

While growing, cryptocurrency always stays in the news for various reasons. Although unfortunate, one of them is its various vulnerabilities due to which many cryptocurrency exchange platforms have been victims of cyberattacks.

The recent, as you would know, is the WazirX exchange hack that cost it crypto tokens and coins worth USD 230 million!

 

However, we’ve discussed a few more in a previous post – Scandals that Shook Investor Confidence in Crypto: What’s the Way Forward to Rebuild Investor Trust in Cryptocurrency? You may want to explore them for more insights.

Nevertheless, in this post, we will focus on the different vulnerabilities of cryptocurrencies to provide our readers with more insights.

  • 51% Attack

This is an attack on a cryptocurrency blockchain by a group or entity that controls over 50% of the hashing power – the computing that solves the network’s cryptographic puzzle.

A party or group with as much network control can alter the blockchain!

Accordingly, the group introduces an altered blockchain to the network at a very specific point in the blockchain. The network theoretically accepts the alteration given that the group controls the majority of the blockchain.

A miner using a 51% attack can double-spend his coins and prevent transaction confirmation. However, they cannot reverse confirmed transactions, steal funds from a particular address, create new coins, or false transactions.

An example of the 51% attack is Bitcoin Gold in 2018. The attack caused a colossal blow to the cryptocurrency, making it lose over USD 18 million with double-spending.

  • Dust Attack

Although not as common, one cannot ignore the dust attack.

In this attack type, the hacker locates an active address on the blockchain and sends small amounts of USDT. However, while doing so, they use the address with a beginning and ending as one of the past user transactions.

The transaction appears on the victim’s history of wallet transactions, making them erroneously copy the hacker’s address and sending the USDT to the hacker’s address instead of the correct one.

One such attack was executed in October 2023 using USDT on the Tron Network. It started with a legitimate transfer, leading to an event that culminated in a robbery of 629,002 USDT in only four days.

  • Cryptojacking

Cryptojacking involves the unauthorized use of a computer or machine’s processing power to mine cryptocurrencies.

It is usually done without the owner’s permission or knowledge.

The attack is relatively harmless in terms of fund security. However, it can annoy the target users and result in extra energy costs.

Visitors of the torrent website, The Pirate Bay, discovered that their computers were being used to mine Monero (a cryptocurrency) without their permission.

The attack slowed down computer performance and increased CPU usage.

  • Phishing

Phishing is amongst the most common of cryptocurrency attacks.

And what makes it more critical is the ways in which hackers do it. Some common ones are spear phishing, fake browser extensions, phishing bots, and DNS hijacking.

Let’s see phishing bots for example.

In crypto, phishing bots are used to compromise the seed phrases of users. An example of this is the crypto wallet MetaMask. The wallet cautioned users about a phishing attack carried out in its name. It also informed users that a group of phrase-stealing bots was responsible for the attack.

  • Fake ICOs

ICO stands for Initial Coin Offering, which appears as good as a legitimate ICO. However, it does not have the technology or infrastructure to support it.

ICO aims to release a new cryptocurrency for the public. It is expected that the coin’s developers will use the proceeds to support the network of cryptocurrency. But in the case of a fake ICO, the developers disappear with the ICO proceeds.

You can look at Centra Tech as an example of such an ICO. Valued at USD 25 million, the scammers claimed support from major names worldwide, which was a sham.

The Lesson?

The digital nature of cryptocurrency makes it vulnerable to attacks and scams.

Although one cannot fully secure something, players can strengthen their platform and the overall cryptocurrency ecosystem by taking the right security measures.

However, on the other hand, users also have a responsibility to make informed and reliable choices and continuously stay updated about emerging and evolving threats.

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