51% attacks, bugs, and hacks! Oh my! Here are the problems facing blockchains

Blockchains haven't been living up to their hype of impenetrability. 

At least that's the thesis of a longread out last week by the inimitable Mike Orcutt at MIT Technology Review. "[W]e’ve long known that just as blockchains have unique security features, they have unique vulnerabilities," Orcutt wrote. "Marketing slogans and headlines that called the technology “unhackable” were dead wrong."

Orcutt's take begins by looking at Ethereum Classic, which notably suffered a so-called 51% attack in which one actor was able to take control of more than 50% of the cryptocurrency's network to rewrite its history of transactions for a profit. Such an attack is inherent in most cryptocurrencies, Orcutt notes. 

Here's the relevant passage (emphasis is Orcutt's): 

"Susceptibility to 51% attacks is inherent to most cryptocurrencies. That’s because most are based on blockchains that use proof of work as their protocol for verifying transactions. In this process, also known as mining, nodes spend vast amounts of computing power to prove themselves trustworthy enough to add information about new transactions to the database. A miner who somehow gains control of a majority of the network's mining power can defraud other users by sending them payments and then creating an alternative version of the blockchain in which the payments never happened. This new version is called a fork. The attacker, who controls most of the mining power, can make the fork the authoritative version of the chain and proceed to spend the same cryptocurrency again."

To be sure, conducting such an attack is a costly endeavor. Still, new services that allow nefarious actors to rent computing power could make them more prevalent in the near future, Orcutt notes. 

Read the full piece, here.