What is a Zero Day Virus and it’s impacts on Cryptocurrency?

Cryptocurrency has brought in a new era of financial services and changed the financial world by offering decentralized, borderless and permissionless transactions through the use of smart contracts.

However, it is still an emerging technology that comes with it's own set of security risks. One of the biggest threats facing crypto projects today is zero-day code exploits which are vulnerabilities in software or smart contracts that hackers exploit before developers can patch them.

These vulnerabilities have been responsible for some of the largest hacks in the crypto industry, highlighting both the risks and the evolving security measures in decentralized finance (DeFi).

What are Zero Day Code Attacks?

Zero day code refers to a software vulnerability that is unknown to the software developer at the time meaning there is no patch available at the time of discovery. The term “zero-day” literally means that the developer has had zero days to fix the issue before it is exploited.

Zero day vulnerabilities have existed across all software from operating systems to mobile apps since coding first emerged. In cryptocurrency or more so in blockchain technology this often means in smart contract flaws, cryptographic weaknesses or protocol bugs.

These vulnerabilities are extremely dangerous because they allow attackers to steal funds, manipulate transactions or disrupt entire networks before anyone is aware of the flaw.

With Blockchain being a new sector, this is the sectors biggest risk and it is why Bitcoin and Ethereum remain the top two networks as they have been around the longest and have battled through a lot of coding issues.

Cryptocurrency and Blockchains most at risk of this weakness

The decentralized nature and early stage development of cryptocurrency technology make it a prime target for zero day exploits. Unlike traditional financial systems where centralized entities like banks or governments can quickly issue patches. Decentralized platforms rely on consensus mechanisms and community governance which can slow down the response to threats.

Many blockchain projects are built on open source code which allows developers worldwide to contribute and innovate by copy pasting each others work but also, each others flaws. While this creates transparency and collaboration, it also means that hackers can inspect the code for weaknesses and move from chain to chain with the same hack.

Once a vulnerability is found it can be exploited multiple times before developers have time to release a fix and pass it on to the next project.

The Blockchain Sectors Biggest Flaw

Traditional software can receive quick patches across it's entire network where smart contracts are immutable once deployed. If a contract has a vulnerability the only way to fix it is often to redeploy a new version and migrate users known as a "fork" which is costly and time consuming. This makes them the perfect target for zero-day attacks.

Crypto platforms often hold millions if not billions of dollars in user funds. Unlike traditional banks, which have robust fraud detection and insurance mechanisms decentralized platforms may not be able to recover lost funds. This makes crypto platforms an attractive target for hackers looking for quick, untraceable payouts.

Despite all this the sector is changing and becoming more risk adverse and developing ways to overcome hacks including with centralised banks as the only way to access the funds is to sell it for fiat and with partnerships this can be prevented.

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image sources provided supplemented by Canva Pro Subscrption. This is not financial advice and readers are advised to undertake their own research or seek professional financial services.

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