Blockchain and Piracy (2)

The very features that make blockchain secure are the ones that can attract cybercriminals.

• Decentralization: Makes transactions difficult to trace
• Security: Data is immutable and resistant to tampering. This means that once malicious data has been introduced, it becomes very difficult to remove or modify.
• Automation: Many actions can be programmed, which implies a certain vulnerability to bots programmed by cybercriminals
• Anonymity: Encourages some users to carry out illicit activities, such as money laundering, ransomware and the sale of stolen data.

Some very specific cyberattacks are also tied to the use of blockchain. Here are a few examples:

51% Attacks

A 51% attack occurs when a group controls more than half of the computing power of a blockchain network. This makes it possible to modify transactions by altering the integrity of the ledger. Although this attack is difficult to carry out on large-scale blockchains such as Bitcoin's, it remains possible on smaller, less secure blockchains.

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Smart Contract Scams

Smart contracts, which automate transactions on the blockchain, are vulnerable to coding errors, which allows cybercriminals to exploit flaws to steal funds or change the terms of the contract. A well-known example is the 2016 attack on the DAO (Decentralized Autonomous Organization), which led to the loss of 3.6 million ether because of a flaw in the code.

Phishing and Private Key Theft

Blockchain users are often the target of phishing attacks in which hackers try to obtain their private keys. Unlike the guarantees offered by traditional banks, blockchain transactions are irreversible, which means stolen funds cannot be recovered. This highlights a fundamental weakness of blockchain: responsibility rests entirely with users.

Criminal Activities Facilitated by Blockchain

The development of blockchain has indirectly contributed to the emergence of new hacking methods, allowing criminals to improve their techniques for certain specific business offences.

• Money laundering

Cryptocurrencies allow criminals to launder money more easily by transferring funds anonymously and evading traditional financial regulation. Decentralized platforms, or exchanges, allow hackers to convert their illicit gains into legitimate currencies, making transactions hard for the authorities to track.

• Ransomware and cryptocurrency ransom demands

Ransomware is malicious software that encrypts the victim's data and demands payment in cryptocurrency to unlock it. Blockchain offers a level of anonymity that makes this type of attack easier. Attacks such as those that targeted critical infrastructure in the United States in 2021 show the scale of this threat.

• Dark web black markets

Illicit marketplaces on the dark web often use blockchain to carry out cryptocurrency transactions, offering a secure environment for sellers and buyers of illegal goods such as drugs, weapons and hacking software.

Examples of Attacks Involving Blockchain

Mt. Gox is one of the first landmark cases. In 2014, this Bitcoin trading platform lost 850,000 bitcoins in a hack, which remains one of the largest in history. The lack of regulation and the vulnerability of the infrastructure allowed hackers to divert the funds over a long period without being detected.

In August 2021, Poly Network was the victim of a $600 million hack because of a flaw in its smart contracts. Poly Network is a protocol for exchanging one cryptocurrency for another. Just before the attack, Poly Network had transferred the equivalent of $1 billion in value. The hackers, having detected a weakness in how the platform handled its cross-chain transactions, were able to transfer funds to addresses they controlled. They then returned the funds, since the very purpose of the attack was to show the system's vulnerabilities and warn that it needed to be improved.

The Response of Authorities and Regulators

Although it is still very lightly regulated, a few initiatives are beginning to appear to secure blockchain transactions. However, because blockchain is a global technology, regulations would need to be standardized and harmonized to be effective. Yet significant disparities exist between countries, particularly regarding user protection and transaction transparency.

KYC and AML

Exchange platforms are now subject to identity verification (Know Your Customer – KYC) and anti-money laundering (AML) requirements, to prevent criminals from using blockchain as a tool to hide their funds.

Address Blocking

Regulatory authorities are beginning to monitor and block certain addresses associated with criminal activity. In 2020, for example, the United States seized more than $1 billion in Bitcoin associated with the Silk Road black market.

Blockchain and Anti-Piracy

In 2021, Microsoft published a research paper in which it wrote that it wanted to rely on the Ethereum blockchain to create a system to fight the sharing of illicit content on the internet. However, nothing seems to have been put in place so far, and the document describing the process is no longer available.

Other initiatives exist in two areas: content monitoring, and the hunt for cybercriminals.

In theory, if the internet were built entirely on blockchain technology, it could become impossible or, at the very least, extremely difficult for pirates to illegally share media content and profit from it.

Blockchain can notably help prevent piracy through content monitoring. It would make it possible to store a large amount of information and, in theory, to identify illegal use of content, as well as the device on which that content was used.

Blockchain also makes it possible to improve current watermarking systems; a South African company, CusosTech, has included a watermark that rewards in cryptocurrency any user who spots an illicit use of content protected by that watermark.

However, these initiatives remain marginal for now.

Join us in December as we look at a little-known phenomenon: the vulnerability of electric vehicles to hacking. In the meantime, if you have a film, a series, software or an ebook to protect, don't hesitate to call on our services by contacting one of our account managers: PDN has been a pioneer in cybersecurity and anti-piracy for more than ten years, and we certainly have a solution to help you. Happy reading, and see you soon!

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