GameFi is one of the innovative trends in the field of cryptocurrency technologies. In 2021, projects that combine game mechanics, such as NFT and DeFi, are developing rapidly. The main reason for its growth is new money-making opportunities for investors and ordinary players, and major companies. Although blockchain games are promising, they have their limitations. Among the significant ones are data loss, the need to reward users, and the problem of transfer fees, which often bite off most of the players’ income.
The user interface and experience are also significant obstacles to introducing blockchain-based games. Finally, blockchain technology is still poorly scaled, and the authorities consider money laundering using NFT a new form of crime. Read on to know more about blockchain-based hacks and attacks and how the security risks will affect the future of Web 3.0.
Security in Blockchain Games
Blockchain converts records and distributes them across a network. With its help, verification of transactions no longer depends on a single and centralized institution. Hence, a no-corruption policy is a primary security benefit of a decentralized structural mode.
Blockchain technology has several built-in safety features, such as identity controls, cryptography, and software-mediated contracts. It offers high levels of transparent data protection by enabling a distributed mode to verify access, validate transaction records, and preserve privacy.
Notwithstanding all these security enhancements, the blockchain market has still faced some security-related problems. Money attracts hackers, and blockchain networks are multiplying both. Decentralized financial breaches made up 76% of all weighty hacker attacks in 2021, with over $1 billion lost within just the third quarter, as reported by Atlas VPN. The same period also had 20% more blockchain-related hacking incidents than in 2020, as per data by SlowMist.
Top 5 Security Issues in Blockchain Games
Blockchain-related attacks come from outside performers, along with insiders. Many used standard tactics, such as phishing, social engineering, attacking records in transit, or targeting coding errors. Here are five significant factors that have caused issues in the blockchain security sphere.
1) New Blockchain Exploitation Methods
Blockchain has brought new tools and techniques for exploitation. As a result, a new category of cyber threats is developing, with tactics unique to digital ledger networks.
- Cryptojacking is a crime that occurs when computers are attacked for their computational power to mine crypto assets. This illustrates backdoor and on-ramp exploits like supply chain attacks that use the blockchain’s distributed nature.
- Rug pulls happen when insiders such as criminal groups, cryptocurrency developers, and influencers — generate hype about a venture only to run off with financiers’ funds. Such pump-and-dump schemes have brought about significant billion-dollar losses throughout 1,300 scams just in a year – 2021.
- Flash loan attacks are cases like so: smart contracts that support flash loans are directly attacked to siphon resources elsewhere. These attacks exploit so-called uncollateralized loans by manipulating inputs of a smart contract, as spotted in the case of xToken of a $24 million loss.
- 51% of attacks occur when most of a network unites against a minority of users. This incident took place on several blockchain platforms such as Verge Currency, the smart contracts token Ethereum Classic, and ZenCash (Horizen).
The well-known cat-and-mouse game related to mitigation versus cyber threats is also playing its part across other technological novelties: edge computing, AI, IoT, and quantum computing embody new tools for malicious attacks and security improvements.
2) Not all Digital Ledgers are Equal
There is a broad variation in blockchain architectures, typically overlooked in market-based discourse, especially connected to how various structures and components incorporate security tradeoffs. Private against public blockchains, for instance, differ in whether unknown or known entities can join the network and take part in verification.
Different network configurations use diverse components, carrying various security risks. Furthermore, these configurations produce several queries like: How is identity verified? What incentivizes miners? As separate components, blockchain-related algorithms and uses continue to evolve, so attack tactics and threat mitigation techniques will simultaneously improve.
3) Cybersecurity Skills Crisis
The existing cybersecurity landscape is undergoing a significant talent shortage. This challenge is more threatening in the digital ledger security space as even few cybersecurity specialists have the needed expertise or grasp new security risks of the emerging decentralized economy Web3.
4) Lack of Blockchain Games Regulation
While several blockchains supporters worry regulation may delay the innovation process, standards can, overall, benefit security and novelties. The existing market suffers from a high level of fragmentation, where companies, products, and consortia operate using diverse regulations and protocols. That means game developers fail to learn from the security vulnerabilities and errors of others.
Decentralized record-keeping is also vulnerable to corruption. Smart contracts do not serve as a replacement for compliance — they aren’t lawfully binding. From counterfeit to money laundering, privacy, scams, and unclear monitoring environment slow adoption and allows cybercriminals to prosper.
5) Human Factor Risks
Recent blockchain-related attacks haven’t focused a lot on the technology but on basic human vulnerabilities. For instance, stolen private keys — cryptographic digital signatures — were the probable cause of the $73 million breaches back in 2016 that crypto exchange Bitfinex’s suffered.
Endpoint susceptibilities are also entry points for several malicious actors, such as ones at the device, e-wallet app, or third-party vendor level. Vendor employees are targets, too. For example, the crypto exchange Bithumb was hacked in 2017 using an employee’s PC. Developer incompetence and inaccurate data input are other risks to be alert about.
What is GameFi?
Two words make up this term – Game, and Finance (decentralized finance). It refers to blockchain projects that allow you to monetize the blockchain gaming experience. Thus, the user can make a profit from the game. This is possible because the game concept includes blockchain technologies and cryptocurrencies.
Such blockchain games can be combined with any tools of DeFi:
- algorithmic stablecoins;
- means for issuing new tokens.
Similar blockchain game ventures are launched in a distributed blockchain registry. This means that all the items that gamers receive become their full-fledged property.
Characters, land plots, artifacts, weapons, and armor in such games are created in the form of non-interchangeable tokens (NFT). They become digital assets that can be freely bought and sold in the game and beyond. Its creators determine the kind of cryptocurrency for calculations, often creating a custom token for this purpose.
The Benefits of Blockchain Games for Players
Since games are considered entertainment or harmless leisure, gaming companies do not see much regulation. There are no laws aimed at combating the abuse of the in-game economy. Blockchain gaming companies can do anything, including manipulating the value of their digital assets.
- There are advantages for players in the form of ownership rights of in-game assets or items with the ability to sell or exchange them.
- Blockchain and tokenomics allow legalizing the sale of game items to safely sell or exchange them.
- Players get returns in real life, both through rewards received during the gameplay and by trading their virtual assets on decentralized exchanges.
- Unlike in traditional games, where the content belongs to the operator, users can now participate in content creation. They can create unique items and sell them.
- New ways to monetize the gameplay have appeared. Game developers can attract more players thanks to additional financial incentives, for instance, by excluding intermediaries.
The Future of Blockchain Games
2021 has renovated the smart contract blockchain market via decentralized applications such as record-breaking investment, nonfungible tokens, and market capitalization. Yet, market activity reveals the growing range of current cybersecurity challenges and the new risks decentralized structures can empower.
Statistics speak louder than any forecasts because the market determines the winners and quickly seizes any reward-promising opportunity. Gamers want variety, new experiences, and ways to earn in their favorite blockchain games. It is hard to say about the gaming prospects when the blockchain itself is just beginning to develop its potential.
Soon, the market will be flooded with new games as blockchain networks scale and allow users to access the more user-friendly ones — better suited for devices and with better graphics and fascinating storylines. The Web3-focused opportunity for the next generation is not just about empowering users through distributed governance – economic, social, and technical, but about better safeguarding the entire ecosystem in development.
Overall, there are no specific regulations against Bitcoin gambling. Thus, they are neither allowed nor prohibited officially.
These games can be profitable, but in most cases, you will lose some money getting involved in micro-transactions and pay-to-win models.
Crypto assets let players collect and trade digital assets, which they may exchange anywhere. Thus, it offers the players a safe way to make money.