Abstract
The immutability of blockchains and the transparency of their transaction records would appear to limit the benefit of exploiting them for criminal activity. However, blockchains also offer a high degree of anonymity, similar to fiat paper currency; the technology was intended to facilitate trustless transactions. Coupled with a global, borderless reach, blockchains have become an enabler of cybercrime. They are a new class of assets that, like all other assets, possess security risks and become potential targets of attack. In particular, cryptocurrencies, which depend on blockchain technology, provide significant incentives for attack because of their value. The goals of this chapter are to identify and classify blockchain-based cybercrimes and to explore the avenues for protecting against them at individual, organizational, and policy levels.
TopBackground
To appreciate how a cybercriminal might attack blockchain assets, it is necessary to understand what blockchain assets are and how a blockchain maintains them. The sub-section on Technology Overview covers the technology behind the blockchain itself as well as two related technologies, smart contracts and state channels, which augment the capabilities of a blockchain. The next sub-section The Scalability Trilemma addresses the technological tradeoff among decentralization, security, and scalability of blockchain networks.
Key Terms in this Chapter
Wallet: A file holding a private key that enables a user to spend tokens on a blockchain.
Node: A computer that verifies the validity of transactions posted to a distributed ledger.
Dark Market: A clandestine market in the shadow economy.
Money Laundering: The conversion of illegally obtained assets into legitimate holdings.
Distributed ledger: A database synchronized among multiple nodes that maintains a record of transactions.
Smart Contract: Computer code residing on a blockchain that responds to transactions directed to its address.
Anonymity: Describes situations where the acting person's name is unknown.
Cryptocurrency: A digital currency represented as token stored on a blockchain that uses encryption to regulate the generation and transfer of funds.
Security: Free of danger and highly resistant to attack.
Private Key: A secret code, associated with a blockchain user’s address, needed to sign transactions, and therefore spend cryptocurrency on a blockchain.