Money carted away so far in 2021, according to Defiyield, is up to $1.9 billion. And it’s not even the end of the year yet! Perhaps the increased liquidity of the crypto market makes it possible that scams are worth much more now. And that the increased valuation of the market now holds a stronger attraction for hackers as it has for investors.
Token Security
Blockchain-integrated solutions often require small data packs, otherwise known as tokens or cryptocurrency, as a means of exchange for the services available and rendered on the platform. The mix of cryptography, pseudo-anonymity, transparency, and sophisticated consensus of the blockchain used reduces the hacking footprint of transactions on the network.
Gaining remote backdoor access to platforms based on blockchain technology means compromising the entirety of the blockchain’s ecosystem. That such an architecture with multiple fail-safes and hack-proof measures can be compromised makes one appreciate the evolution of hacking, from the humble beginnings of phreaks rerouting calls to hacks as complex and expansive as 51% attacks.
The drastic increase in hacking sophistication seems to have outpaced the defense mechanisms employed by the blockchain industry, and newer projects are not being innovative enough.
Hacking Entry Points And Types of Hacks
Lossless has been able to identify several attack types and the major entry points of token hacks. They are:
Smart Contracts
Smart contracts are blockchain programs written to ensure the trustless, autonomous, and automatic validation of transactions after a given set of conditions are met. This reduces the influence of humans on the framework and saves time and money. Smart contracts have become increasingly advanced in their application. They can now be written to set in motion a cascade of transactions and workflow.
The exponential growth of DeFi (decentralized finance) in 2020 is responsible for the increased usage of smart contracts. It became the most efficient way to execute transactions on decentralized platforms. The increase in transactions caused an increase in the total value locked in smart contracts. Because of this, smart contracts have become under increased scrutiny from hackers.
Smart contracts are expensive to build because developers have to pay great attention to details and ensure that the conditions necessary for transaction validation are air-tight. Because there is a shortage of credible blockchain developers, and it is pretty pricey to hire one, projects have resorted to copying codes from existing projects. The smart contract code may not fit well into the project’s protocol and lack proper vetting from an expert developer. As a result, such projects are more predisposed to hacks.
Dusting Attacks
Hackers send wallet owners small amounts of a cryptocurrency, known as dust, that usually goes unnoticed. These tokens are markers of some sort that help malicious actors identify wallet owners whenever they pay for services. After which phishing is used to obtain essential info to access the wallet remotely.
Eclipse, Sybil, and 51% Attacks
Sybil and Eclipse Attacks are similar in their approach, but the goals differ. Sybil Attacks involve the creation of multiple accounts, nodes, or computers to influence an ecosystem-wide decision-making process.
For Eclipse Attacks, creating multiple peers is meant to fool participating peers and take charge of a node on the network. The ultimate goal of an eclipse attack is more grandiose and technical than Sybil’s. The goal could be either carting away with peers’ tokens by exploiting confirmation processes or turning the large-scale Eclipse Attack into a 51% Attack.
51% Attacks occur when the mining rate is controlled by a single entity. Such mining power can be used to alter transactions at will and cause a system-wide mining monopoly.
Replay Attacks
As the name suggests, Replay Attacks occur when unscrupulous elements interrupt valid data being transmitted on the network and replay it. This activity can be used to exploit the ecosystem in many ways.
First, the encrypted data’s information can be assessed because the protocol interprets the data as valid and native to the network. Secondly, parsing the data gives hackers an idea of how to exploit the network further. Or replays can be used to fool peers into doubling transactions.
As you can see, the intricacies associated with token encryption, cryptography, and other crypto-centric jargon make it almost impossible for the average investor to know if a token is secure or not.
Lossless Saves The Day
Lossless has taken an in-depth study into the various hack entry points and come up with how creators can forestall such attacks and regain previously stolen tokens.
Lossless protocol’s key is written into the base code of the token. On suspicion of a hack, the code is activated, resulting in the seizure and freezing of the tokens until all doubts are cleared. Freezing can be instant or permanent.
If fraudulence is suspected when a set of parameters are triggered and the Lossless protocol automatically swings into action and stops the transaction, the freeze is said to be instant. Also, if the hack was identified by a community member.
Freezes are permanent if the hack has undergone further verification by the Token Creator, Lossless Company, and Lossless Committee. These three make up the Lossless Decision-Making Structure and take necessary measures in reversing stolen tokens.
Summary
As the world of DeFi continues in its impressive march, protocols, projects, and organizations within the space will come under increasing attacks from malicious actors. The cryptographic complexities of tokens coupled with the shortage of capable developers is a terrible mix, especially now. For this reason, Lossless protocol offers creators of cryptocurrencies an easy but infallible way out of this mess. The simple integration of Lossless’ code into the token improves the security of the token and enables the seamless retrieval of stolen coins.
About Lossless
Lossless is the world’s first DeFi hack mitigation tool for token creators. Apart from our known cyber security solutions and renowned professionals, the community also plays a role. With a tangible reward system, community members are also encouraged to explore new ways to detect hacks and fraudulent transactions.
Our protocol halts counterfeit transactions through various methods of fraud identification and automatically reverses any stolen tokens back to the original owner. Our solutions to the impending problems of cyber theft within the blockchain space are thorough and applicable within many protocols.
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