DDoS Can Cripple a Blockchain, What Does This Mean to the Cryptocurrency Ecosystem
Over two decades old, blockchain has become the actual foundation for mining, security, and the creation of cryptocurrency. It is dependable, trusted, and widely used for multiple forms of digital currency around the world.
However, due to its digital nature, blockchain is susceptible to attack and exploitation. One of the most dangerous threats to blockchain is distributed denial of service attacks.
However, even when vulnerabilities exist, networks and users can find ways to prevent harm to blockchain transactions and information. We discuss these issues and how you can proactively protect yourself and your organization.
What Is Blockchain and How Does This Technology Work?
While complicated, blockchain generally boils down to a specific type of database. This is a way to store information in blocks chained together. These blocks are chronological in order and increase as fresh data comes into the blockchain. This type of data transaction has no central authority and provides group access through decentralization.
Decentralized blockchains are irreversible transactions, so once the data is within the database, it cannot be changed. Blockchain is a trustworthy transaction, secure from outside sources and moves quickly throughout various networks around the world. Unlike other forms of currency, there is no physical representation to a blockchain, as it is only data. It can also store the history of cryptocurrency transactions, legally binding contracts, and inventories of various products.
How Blockchain Is Built in Bitcoin Mining
Cryptocurrency mining occurs through a process with computers solving intricate mathematic problems. The mining of bitcoin and other cryptocurrencies occurs through these processes, and transactions combine with similar ones and are then transmitted to all nodes. This enacts an update to the associated ledgers. New currency is possible through rewards given once the computers solve the mathematic computations. The mining involved with bitcoin creates blocks of data with these transactions which eventually create blockchains. These are large and long sequences of mined transactional data.
The nodes will confirm trusted data and verify the information within the blockchain. Through checks and balances with these processes, the blockchain can consistently maintain integrity. This ensures trust in the bitcoin mined through the blockchain.
Why Is Blockchain Considered the Base of Cryptocurrency “Unhackable?”
Blockchain utilizes multiple sources of defense against hackers to prevent attacks and to assist in reducing the costs of damage once a cyber threat like a DDoS attack occurs. Blockchain was once considered as unshakable because the data is immutable or irreversible once entered. It is decentralized with no individual authority such as a bank or government. Additional protocols also identify and report potential threats to the blockchain in use. The decentralization specifically reduces various risks to the data and limits fees with transactions and processing of the data. Blockchain accomplishes this through spreading processing power over multiple computers in a network.
How a DDoS attack can Cripple Blockchain
Related to theDDoS attacks on EXMO, blockchain has some vulnerabilities regarding DDoS attacks. These include the following:
- Blockchain nodes:Blockchains exist on nodes that update with the latest data and are all connected.
- Smart contracts: Blockchain programs run through predetermined conditions met within the blockchain.
- Consensus mechanisms: There are three consensus mechanisms. The Proof of Work or PoW, the Proof of Stake or PoS. and the Delegated Proof of Stake or DPoS. These all generally confirm the deletion of equivalent data within the blockchain.
- Wallets: A digital wallet provides access to, storage, and management of cryptocurrency such as bitcoin.
The 51 percent attack happens when a hacker or other malicious user injects data with over 50 percent of the network processing power or hash rate. When the attacker does this, it is possible to overtake chains of data that do not go to the intended party. Another side effect is the hacker can copy the data and add it to the chan. This then will delete previous information, so the block never saw it.
The perpetrator of the attack will use a DDoS to infiltrate some of these vulnerabilities and steal access to blockchain data and transactions such as bitcoin.51 percent attacks led to losses of over $1.1 million with Ethereum Classic in 2019, nearly $2 million with Verge in 2018, and another 2018 Verge attack with just over $1 million.
What Is a DDoS Attack and How Does It Target Blockchain and Make It Prone to Hacking?
Someone with malicious intent such as a hacker can flood a server, single network, or multiple networks with various requests or additional traffic leading to a Distributed Denial of Service or DDoS. Usually, the individual or group responsible wants to either slow the system or cause an entire collapse. Once a DDoS starts on one computer, it will spread to others in the same network, leading to catastrophic failure.
The vulnerabilities of blockchain through nodes, contracts, or wallets can lead to an over utilization of processing power within the server or network. This then causes a loss of connectivity with cryptocurrency exchanges or other applications connected at the time. The perpetrator of these attacks can start through tracking IP addresses with specific locations around the world.
The DDoS attacks on EXMO led to the British servers going offline. This caused the website to go down and the servers’ inability to run during the aftermath of the attack. Hot wallets were compromised during this event, and the perpetrators withdrew five percent of all assets involved. EXMO explained that they would cover all losses after suspending every withdrawal at the time. This led to a new infrastructure development with a separate server for hot wallets.
What Does This Mean to the Crypto-Market?
The Crypto-Market often fluctuates. The value changes, based on word of mouth, information that can help or harm the influence of various cryptocurrencies, and damage through DDoS attacks that can lead to financial losses. Because these malicious users can cause websites, servers, or networks to go offline for indeterminate amounts of time, the Crypto-Market can see dips in investment and reliability of financial transactions.
Often, after a DDoS attack, the blockchain development may change focus or utilize new techniques that decrease the possibility of vulnerabilities.
After a DDoS Attack, What Is Its Implication for the Crypto Market and Bitcoin Specifically?
Cryptocurrency markets grew from $19 billion to $602 billion from the beginning of 2017 to the end of 2017. Volume trade with these markets and even the negative effects of DDoS attacks are normally mitigated within the same day the damage occurs. However, malicious users can affect the market through Twitter feeds, news through Google Searches, and the status pages of the network.
How Does a DDoS Attack Affect the Bitcoin Ecosystem?
The trade of Bitcoin will fluctuate based on the downtime of the servers or websites associated with the cryptocurrency. Offline websites affect the access to trades, the ability to purchase or sell, and access to Bitcoin. Additionally, if someone influential says something through social media, the market can suffer a downtrend or an uptrend based on positive or negative reviews of Bitcoin. This generally leads to either more buying of the cryptocurrency or fewer purchases.
Once the market is affected by these trends, the prices will change. Mass selling may occur after a DDoS attack if there are numerous users affected by a loss of financial transactions. This is even possible if the company behind the Bitcoin data reimburses users for these losses.
Can A Cyber-Attack Change the Market from Bull to Bear?
The general statistical trend of the crypto-market appears little affected by the negative effects of DDoS attacks. Websites are normally back up and online within the same day. Trades, purchasing, and selling cryptocurrency is not usually severely impacted by most cyber-attacks. Bitcoin, in particular, has few patterns that explain the bull and bear rise and fall of prices. However, multiple cyberattacks targeting one website, server, or network can lead to sustained losses for the company. The loss of faith in the downtime from the attack can lead to a bear market where loses are constant for a period of time.
What Cybersecurity Measures Should be Taken to Prevent a DDos Attack?
To prevent similar DDoS attacks such as that which occurred on EXMO and other companies, there are numerous cybersecurity measures you can put in place. Prevention is key. There are several ways to prevent DDoS and other cybersecurity attacks, including:
- Develop a Denial of Service plan by assessing security risks and what to do in case an attack ever occurs.
- Enhance network infrastructure security for multi-level protection protocols.
- Minimize user errors and security vulnerabilities.
- Develop a strong network architecture by focusing on redundant resources within the network and servers.
- Utilize the cloud to spread out the attack and use multiple environments to prevent damage within the system.
- Recognize common warning signs of DDoS attacks, such as increased traffic, intermittent connectivity, and a lack of standard performance.
- Consider investing in DDoS-as-a-Service, which can provide flexibility, third-party resources, and cloud or dedicated hosting on multiple types of servers at the same time.
It is imperative to identify and then respond to attacks in real time. By using checkboxes, captcha and other methods on the website, programs and users can discover if activity is real or a potential threat. Changing response times through automation, recognizing patterns of attack, and implementing defense systems can all provide measures of protection.
Automation of attack detection can reduce DDoS response time against the attack. This method provides near instant detection for incoming DDoS attacks. When traffic spikes to untenable levels, automation can redirect traffic through an automated defense system. This system is usually adaptive and can employ various methods if the DDoS event is different from the previous attacks. Automation can identify patterns in traffic by sifting through a large amount of data quickly. This can provide real time solutions during the attack. The defense system of automation can also access IP blocklists and weapons to protect certain zones of information.
Automated defense systems provide adaptable solutions for the ever-evolving hacker intent on stealing data. With real-time updates and access to lists the company or user may not have, network administrators can implement strategies to prevent or to mitigate the damage caused at the time of attack.
New Trends in Protecting Against DDoS Attacks
A new cybersecurity trend involves awarding cryptocurrency to users that spot irregular activity and report the issue. Previous and continuing trends involve tracking the deviation in traffic. Some companies will use software to analyze answers to queries, determine if transactions are legitimate, and evaluate if processes are in line with true activity. This can single out bots or malicious traffic.
Pattern recognition is important when determining whether a DDoS attack is underway. Companies can use machine learning technology to detect irregular patterns. A query can help to determine which IP addresses, timeframes, or accounts are affecting the network during a DDoS attack.
Another trend to guard against DDoS attacks is to identify IP addresses commonly associated with DDoS attacks and block them.
Some companies use forensic tools after a data breach or DDoS attack to determine how the attack occurred and how to respond to a similar one in the future. This may involve using programs and encrypted recorded logs to review later.
It is vital to stay alert to potential threats. By always being prepared for potential disaster, you may be able to prevent catastrophe. Having a plan in place when the attack happens can limit response time to prevent the website or network from going offline. To accomplish these goals, you can implement stronger cybersecurity measures and invest in resources that recognize various DDoS patterns and alert users immediately to take direct action. These proactive steps can help protect blockchain data and keep cryptocurrency from falling into malicious hands.