DeFiChain

Since its inception and early popularization, the world of blockchain has been rife with hacks and scams. Varying from small theft to major chain hacks, the industry saw over <a href="https://www.reuters.com/technology/crypto-hacks-stole-record-38-billion-2022-led-by-north-korea-groups-report-2023-02-01/" rel="noopener noreferrer nofollow">$3.8 billion in crypto stolen in 2022 alone</a>. With figures like these, it’s no wonder that some investors are hesitant to move into the world of decentralized finance.DeFi as a whole is not fully to blame. Around <a href="https://blog.chainalysis.com/reports/cross-chain-bridge-hacks-2022/" rel="noopener noreferrer nofollow">70% of all cyberattacks</a> in the blockchain industry can be traced back to exploits within crypto bridges. While vital for establishing cross-chain movement and interoperability, crypto bridges are quickly becoming a major security issue in Web3.<h2 id="header-0">Exploring DeFi Vulnerabilities</h2>Interoperability has always been one of the primary targets for blockchain developers. Many have pegged crypto bridges as a strong solution, allowing users to move funds across distinct ecosystems. While bridges aren’t inherently unsafe, they are much more vulnerable than the other elements of DeFi.For example, as a relatively new technology, not all bridges have perfected their code yet. This allows hackers to exploit vulnerabilities in their smart contacts. Many chains provide open-source code, helping to build trust within their community. While great for building a sense of security, it’s not foolproof. For hackers, the open-source code is much easier to find, manipulate, and comb for points of weakness.As DeFi is still mainly unregulated, the attackers often manage to avoid most of the legal repercussions, as there are no KYC documents to hold them accountable. Without legislation that outlines consequences for these breaches, there is little regulation to ensure people are met with any consequences at all for hacking cross-chain bridges.<h2 id="header-1">What Types of Crypto Bridges Are There?</h2>There are a number of distinct crypto bridges, often broken down by function. These bridges, like chain-to-chain bridges, wrapped asset bridges, or multi-chain bridges, all have specific functions. Going beyond these categorizations, the vast majority of crypto bridges will fit into one of two categories, based on how they operate.<ul><li>Trusted Bridges - These bridges operate through a third party - often known as the custodial party. Trusted bridges refer to a centralized method of moving cryptocurrency, where crypto is handled and moved by the tertiary party. An example of this would be the <a href="https://www.bnbchain.org/en/bridge" rel="noopener noreferrer nofollow">Binance Bridge</a></li><li>Trustless Bridges - Instead of being operated by a third party, trustless bridges are a decentralized method of moving cryptocurrency. These use smart contracts, giving users more control over the cryptocurrencies that they use. An example of this would be the decentralized, peer-to-peer <a href="https://defichain-bridge.com/#/escape" rel="noopener noreferrer nofollow">DeFiChain Bridge</a>.</li></ul>While both of these bridge types have unique advantages, they also come with their own set of potential risks. For example:<ul><li>Fake Deposits - If a hacker can generate a deposit event or false deposit without actually having the cryptocurrency to deposit, then they’re able to withdraw crypto on the other side of the bridge. This is extremely common, as seen in the <a href="https://www.halborn.com/blog/post/explained-the-wormhole-hack-february-2022" rel="noopener noreferrer nofollow">Wormhole hack</a>, where the hacking team used fake digital signature validation to steal over $300 million.</li><li>Validator Takeovers - Many cross-chain bridges use validators to approve transactions. If a hacker can manipulate or control the majority of validators, they can approve fake transactions.</li><li>Human Error - Developers could create code that has errors in it. Once found, these errors could rapidly be exploited by hackers to steal crypto from bridges.</li></ul>As the bridging mechanisms continue to evolve, the number of hacking events we see will begin to fall. Yet, we’re still a long way from the 100% secure blockchain bridges.<h2 id="header-2">Strategies To Improve the Security of Bridges</h2>If we want to refine bridge security over time, the blockchain community must start making an active effort in that direction. There are a number of strategies that can help make bridges more secure:<ul><li>Bug Bounty Events - Security hacking events would bring publicity, new intelligent minds, and an additional focus on stepping up security.</li><li>Improved Validator Incentives - Both delegators and validators should receive compensation for helping maintain the blockchain architecture. Beyond that, any validators involved in non-existent or fraudulent transactions should be removed from the system.</li><li>Transaction Finality - Hackers are sometimes able to accept a transaction before it has gone through on the source blockchain; this essentially duplicates funds. By ensuring that every transaction has achieved finality before being executed across a bridge, this would dramatically reduce the attack surface.</li></ul>While these are far from the only methods that developers have to start to turn the tide against the consistent attack on bridges, they are amongst the best. As bridges become more popular across all blockchains, we’re likely going to see even more focus placed on their security.It’s possible that bridge hacks will be a thing of the past in a decade, as we move toward a tried-and-tested security protocol system for all blockchain ecosystems.

Crypto Bridges are a Lucrative Target for Hackers: Can We Strengthen Them?

Table of Contents

DeFiChain

Other articles published on Feb 27, 2023

Evaluate Crypto Project Using Fundamental Analysis

$NFAi | The Third Option

Unitos will launch the Parma Calcio 1913 FanToken

How to Use Etherscan

Unlocking the Future of Micromobility with MOBIX

Shibarium Launch Will Be “As Soon as Possible”

Join our free newsletter for daily crypto updates!