crypto news: Can crypto’s blockchain tech survive the test of time?

Two days ago, Binance, the world’s largest cryptocurrency exchange, admitted its blockchain suffered a double blow when
hackers stole around $100 million worth of cryptocurrency from its blockchain bridge running on the BNB chain (earlier known as Binance Smart Chain).

A blockchain bridge is a tool utilised to transfer cryptocurrencies between different applications that run on the blockchain.

However, Binance’s misery did not end there. Later, BNB Chain said in a blog post that a total of two million tokens of their cryptocurrency BNB – worth around $570 million – were also withdrawn by the hacker.

This year has been particularly challenging for crypto exchanges worldwide, with many nations tightening their laws on crypto trading, some like India imposing high taxes on gains, and a few calling for an outright ban on crypto.

There’s no doubt that the premise of blockchain as a technology is impressive, as it offers the chance to do away with intermediaries such as banks. But decentralisation brings its own set of problems, such as high energy costs, low speeds, and – of course – hacks.

Blockchain projects are considered to be highly secure, but multiple hacks this year have revealed chinks in the armour. Over $1.6 billion worth of cryptocurrency has been stolen from users in 2022, according to
blockchain data platform Chainalysis.

Of the seven largest cryptocurrency hacks to date, six have taken place in the past two years, with Ronin Network ($625 million, 2022), Poly Network ($611 million, 2021), and Binance ($570 million, 2022) topping the charts.

Are crypto blockchains impregnable?

It is important to understand the distinction between cryptocurrencies and blockchains. The former is a decentralised use case of the latter. In simple terms, crypto is a small but significant part of what blockchains make possible.

Cryptocurrencies, which are decentralised digital assets, use cryptography to ensure secure transactions between different parties. Such transactions are recorded and stored in a digital ledger called a blockchain.

While blockchains themselves are nearly immune to hacks, weaknesses outside these digital ledgers offer opportunities to thieves, particularly when it comes to crypto transactions and wallets.

It is not impossible – as has been seen in multiple hacks over the years – for hackers to gain access to cryptocurrency owners’ wallets and use their private key – a sort of passcode needed to sign transactions and prove ownership of a blockchain address – to steal crypto.

There is also one way that a blockchain itself could be compromised – the so-called 51% attack. Hackers can in theory take over a blockchain by controlling a majority of the blockchain’s computational power, called its hashrate. If they own more than 50% of the hashrate, they can introduce an altered blockchain.

This allows them to make changes to transactions that were not confirmed by the blockchain before they took over. While this type of attack is possible in theory, it’s extremely difficult to execute in practice.

But with various central banks worldwide becoming stricter when it comes to crypto, massive hacks like the one last week don’t augur well for the crypto community as they deter investors.

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