Blockchain is completely unhackable
The immutability of an established blockchain's transaction history is very strong, but the broader ecosystem is not unhackable. 51 percent attacks on smaller chains, smart contract exploits, and exchange breaches have caused substantial losses.
What we know
The security of a blockchain derives from its consensus mechanism and the decentralization of its validator network. For a proof-of-work blockchain like Bitcoin, an attacker would need to control more than 50 percent of the global mining hash rate to rewrite recent transaction history, an extraordinarily expensive and practically infeasible undertaking given Bitcoin's scale. This core property makes the transaction ledger of large, established blockchains extremely resistant to direct manipulation.
However, 'blockchain' is not monolithic, and the broader claim of unhackability is false for several reasons. First, smaller blockchains with less distributed mining power have been successfully attacked through 51 percent attacks. Ethereum Classic suffered an attack in January 2019 resulting in approximately 1.1 million dollars in double-spent funds. Bitcoin Gold lost approximately 18 million dollars in May 2018. These attacks were possible because attackers could rent enough computational power from services like NiceHash to achieve majority control.
Second, smart contracts, which are programs deployed on blockchains to automate transactions, have been exploited extensively. The DAO hack of 2016, in which an attacker exploited a smart contract vulnerability to drain approximately 60 million dollars in Ether, demonstrated that code running on a blockchain can contain exploitable bugs even if the underlying ledger is secure. Billions of dollars have been lost to smart contract exploits across decentralized finance (DeFi) platforms.
Third, the exchanges and wallets that hold cryptocurrency are off-chain applications that are susceptible to conventional hacking, social engineering, and insider theft. The Mt. Gox exchange hack in 2014 and the Bitfinex hack in 2016 resulted in hundreds of millions of dollars in losses through these vectors.
The accurate claim is that the transaction ledger of large, mature blockchains is highly resistant to tampering. The full ecosystem surrounding those blockchains is not.
Common claims
- Blockchain technology cannot be hacked.Overstated. Core ledgers of large chains are very secure; smaller chains and smart contracts have been exploited.
- A 51 percent attack is theoretically impossible.False. Multiple smaller blockchains have suffered successful 51 percent attacks.
- Bitcoin's blockchain has never been compromised.True for the core ledger. Exchange and wallet hacks are different attack surfaces.