What Is Blockchain Security? Common Blockchain Security Challenges

In 2024, hackers stole more than $3 billion from blockchain platforms through scams and cyberattacks, according to PeckShield. As more companies adopt decentralized technology, keeping these systems secure is becoming harder and more important.

A major example is the $160 million hack of Wintermute, a crypto company based in the UK. This breach shows how even large, well-funded firms can be vulnerable. These attacks don’t just cause financial losses—they also hurt the company’s reputation and destroy customer trust.

In this blog, we’ll explain what blockchain security is, explore the most common threats and challenges, uncover how fraudsters target blockchain systems, and share practical strategies to better protect your organization.

What Is Blockchain Security?

Blockchain security refers to the tools, protocols, and practices used to protect blockchain systems from cyberattacks, fraud, and technical failures. It relies on encryption, consensus mechanisms, and decentralized networks to ensure data integrity and prevent unauthorized changes.

Security in blockchain goes beyond the network—it also includes safeguarding wallets, smart contracts, and exchanges. As blockchain is adopted across more industries, strong security practices like audits, monitoring, and user training are essential to keep systems resilient and trustworthy.

Why Is Blockchain Security Important?

Blockchain security matters because once something is added to a blockchain, it can’t be changed. This is great for trust—but it also means that if hackers find a way in, the damage can’t be undone.

If wallets, smart contracts, or exchanges are not well protected, attackers can steal money, leak private data, or shut down services. As more companies use blockchain for important tasks, keeping these systems secure is the only way to protect users, prevent losses, and keep things running smoothly.

Blockchain in Cyber Security

Blockchain in cyber security offers a new way to protect data by removing central points of failure. Because information is stored across a network of computers, it’s much harder for attackers to tamper with or delete data.

Blockchain also creates a permanent, time-stamped record of all activity, which helps with tracking and auditing. It’s being used for secure identity management, data sharing, and even detecting fraud. By combining transparency with strong encryption, blockchain adds an extra layer of protection to modern cybersecurity systems.

How Does Blockchain Work?

Blockchain is a special type of database that stores information in a secure and transparent way. Here's how it works step by step:

• Data is grouped into blocks: Each block holds a set of transactions or records. When the block is full, it’s sealed and added to the chain.
• Each block is linked to the previous one: Blocks are connected using cryptographic hashes—unique codes that act like digital fingerprints. This forms a secure chain where one block depends on the one before it.
• Data is stored across a network: Instead of one central server, blockchain data is shared and stored on many computers (called nodes). Everyone in the network has a copy of the same data.
• Transactions must be verified: Before a block is added, network participants use a consensus method—like Proof of Work or Proof of Stake—to agree that the transactions are valid.
• Once added, blocks can't be changed: Changing one block would require changing every block after it on every copy in the network—making tampering nearly impossible.

This structure makes blockchain transparent, secure, and resistant to fraud, which is why it's increasingly used in cybersecurity, finance, supply chain, and beyond.

Key Threats of Blockchain

While blockchain is secure by design, it’s not immune to threats. Here are some of the main risks:

• 51% Attacks: If a single group controls more than 50% of the network’s power, they can manipulate transactions, such as double-spending coins.
• Smart Contract Vulnerabilities: Bugs or coding errors in smart contracts can be exploited to steal funds or change how the contract behaves.
• Private Key Theft: If hackers steal a user’s private key, they can access and control that user’s assets—there’s no way to reverse it.
• Phishing Scams: Cybercriminals trick users into revealing sensitive information through fake emails or websites, often targeting wallet credentials.

These threats highlight the need for strong protections around blockchain networks, applications, and user access.

Emerging Threats to Blockchain Networks

As blockchain technology evolves, so do the tactics used to attack it. Here are some of the newer and growing threats:

• Quantum Computing Risks: Future quantum computers could break the cryptographic algorithms used in blockchain, potentially exposing private keys and transaction data.
• Cross-Chain Vulnerabilities: Blockchains that connect with other chains or use bridges can introduce weak spots where attackers can exploit bugs or misconfigurations.
• Sybil Attacks: In this attack, a hacker creates many fake identities (nodes) to gain influence over the network, disrupting consensus and spreading false information.
• Consensus Manipulation: Attackers may exploit weaknesses in less secure consensus algorithms to take control of the network or delay transaction processing.

These threats highlight the need for ongoing innovation in blockchain security to stay ahead of increasingly advanced cyber risks.

How Fraudsters Attack Blockchain Technology

While blockchain itself is secure, attackers often target the systems and users connected to it. They use phishing to steal private keys, carry out routing attacks to intercept or delay data, and launch Sybil attacks to manipulate network activity. Understanding these specific methods is essential to strengthening blockchain defenses.

Phishing Attacks

Phishing is one of the most common threats in blockchain security. Attackers create fake wallet apps, crypto exchange websites, or browser extensions to trick users into entering their private keys or seed phrases. Once this information is stolen, attackers can instantly transfer the user’s crypto assets. There is no central authority in blockchain to reverse transactions, which makes these attacks especially damaging and irreversible.

To better understand how scammers use emotional manipulation in phishing, explore the techniques explained in Keepnet’s article: Phishing Examples by Emotional Triggers: How Scammers Exploit Human Emotions.

Routing Attacks

Routing attacks target the internet pathways used to transmit data between blockchain nodes. Instead of attacking the blockchain directly, cybercriminals exploit flaws in the underlying network infrastructure—specifically the Internet Service Providers (ISPs) or routers handling blockchain traffic.

During a routing attack, data can be intercepted, delayed, or rerouted, allowing attackers to disrupt communication between nodes. This may lead to temporary network splits, transaction delays, or even attempts to double-spend assets before the network syncs again. These attacks don’t alter the blockchain itself, but they can undermine its reliability and user confidence.

Sybil Attacks

In a Sybil attack, a hacker floods the blockchain network with many fake accounts or nodes. These fake identities are used to gain an unfair influence over the system.

With enough control, the attacker can disrupt how the network works—blocking real users, affecting consensus, or even controlling decisions. Since blockchain relies on honest participation, this type of attack can seriously damage trust and stability. Preventing Sybil attacks involves verifying users and limiting who can join the network.

Common Blockchain Security Challenges

Blockchain offers strong built-in protection, but it's not immune to threats—especially when used in large-scale operational environments. From coding flaws in smart contracts to user-targeted attacks like phishing and malware, many risks emerge at the edges of the system. This section highlights the most common security challenges organizations face when using blockchain technology.

Phishing Attacks on Blockchain Users

Phishing attacks in blockchain often target the trust users place in digital platforms. Instead of exploiting technical flaws, attackers exploit human behavior—posing as popular wallet providers, token projects, or support teams.

What makes this especially dangerous in blockchain is the lack of recovery options. There are no password resets or chargebacks. Once a private key or seed phrase is handed over, full control is lost. For businesses and individuals alike, this means traditional email security isn’t enough—security awareness must extend to recognizing deceptive blockchain-specific tactics.

To explore how phishing techniques are becoming more advanced, read Keepnet’s blog: 6 Shocking Advanced Phishing Attack Examples in 2025.

Malware Targeting Blockchain Wallets

Malware designed to steal from blockchain wallets is a growing threat. These malicious programs can infect devices through fake apps, email attachments, or compromised websites. Once inside, they monitor user activity, steal wallet credentials, or even replace copied wallet addresses with the attacker’s own.

Unlike traditional banking, there’s no recovery process once funds are sent. This makes malware attacks especially harmful in the blockchain space. Protecting wallets requires up-to-date antivirus tools, secure device practices, and user training to spot suspicious behavior.

Smart Contract Bugs and Exploits

Since smart contracts are immutable once deployed, coding errors can lead to irreversible losses. Proper testing, auditing, and formal verification are essential to counter these blockchain security issues.

How to Ensure Blockchain Security

Blockchain technology is secure by design, but that doesn’t mean it’s fully protected out of the box. Security gaps often appear at the user level, in application code, or through third-party integrations. To fully protect blockchain systems, organizations must take proactive steps that go beyond the basics. Let’s dive into the key strategies that help strengthen blockchain environments and reduce the risk of attacks.

Implementing Multi-Signature Wallets

Multi-signature wallets (or multisig wallets) require multiple private keys to authorize a single transaction. For example, a 2-of-3 multisig setup means that any two out of three authorized users must approve a transaction before it can go through.

This setup adds a strong layer of protection. Even if one private key is stolen or lost, attackers can’t access the funds without the other required keys. It also helps organizations reduce the risk of internal fraud or human error by ensuring that no single individual can move assets alone.

Multi-signature wallets are especially valuable for companies managing shared crypto assets, treasury accounts, or high-value transfers that require extra oversight.

The Role of Encryption in Blockchain

Encryption is a core part of blockchain security, protecting data from unauthorized access and tampering. It ensures that only authorized parties can view or interact with sensitive information.

Blockchain uses two main types of encryption:

• Hashing: Secures data within each block by converting it into a fixed-length code. If the data changes, the hash changes—making tampering easy to detect.
• Public-key cryptography: Enables users to send and receive transactions securely. Each user has a public key (shared) and a private key (kept secret) to sign and verify transactions.

Without encryption, blockchain could not offer the privacy, integrity, and trust it’s known for. It’s the technology that keeps data secure, users anonymous, and transactions verifiable.

Importance of Regular Security Audits

Regular security audits are essential for identifying hidden vulnerabilities in blockchain systems—especially in smart contracts, wallet integrations, and third-party applications.

Audits involve reviewing code, testing for weaknesses, and checking system configurations to ensure everything works as intended. Since blockchain systems are often permanent and publicly accessible, even a small bug can lead to major losses.

By running routine audits, organizations can fix issues early, prevent exploits, and build trust with users and stakeholders. It’s one of the most effective ways to maintain long-term blockchain security.

The Future of Blockchain Security

As blockchain adoption grows, so do the threats targeting it. Future blockchain security will rely on smarter technologies and stronger defenses to keep up with evolving attacks.

New solutions like zero-knowledge proofs, privacy-preserving protocols, and AI-powered threat detection are already shaping how blockchains are secured. These tools aim to improve user privacy, strengthen authentication, and detect threats in real time.

The future also demands better user education, stricter development standards, and more collaboration across the industry. Staying ahead of threats means treating security as a continuous process—not a one-time fix.

Emerging Technologies Enhancing Blockchain Security

New technologies are pushing blockchain security to the next level. These innovations help prevent attacks, protect user data, and build more trustworthy systems.

• Zero-Knowledge Proofs (ZKPs): Allow users to prove something is true without revealing the actual data—boosting privacy and reducing exposure to data leaks.
• AI-Powered Threat Detection: Uses artificial intelligence to monitor blockchain activity, detect unusual behavior, and identify threats faster than manual methods.
• Privacy-Preserving Protocols: Tools like homomorphic encryption and secure multi-party computation protect sensitive data while keeping blockchains transparent and functional.

As these technologies mature, they’ll play a key role in making blockchain systems more secure, scalable, and resilient.

How Keepnet Can Help Secure Blockchain Environments

Blockchain networks are only as strong as the people who use them. While the technology itself is secure, human error—like falling for phishing emails or social engineering—remains a major risk. That’s where Keepnet comes in.

Keepnet’s Extended Human Risk Management platform helps organizations protect blockchain environments by addressing the human side of security. It uses AI-driven phishing simulations, adaptive training, and automated phishing response to reduce insider threats and stop social engineering attacks before they cause harm.

By educating users, detecting risky behaviors, and automating threat response, Keepnet empowers companies to build a strong security culture—essential for maintaining trust and resilience in blockchain systems.

Check out the Keepnet Human Risk Management platform to reduce human-related risks and protect your blockchain environment more effectively.