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What is a Rollback Attack? How Blockchain Forks Can Rewind Transactions

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Lorena Nessi
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Key Takeaways

  • Rollback attacks force a blockchain to revert to a previous state. 
  • Attackers exploit vulnerabilities through forks, whether caused by network upgrades or initiated maliciously. 
  • These attacks can reverse transactions, enable double-spending, exploit smart contracts, and manipulate the network. 
  • Both large and small networks are vulnerable to rollback attacks, which have led to financial losses, decreased trust, and disruptions in decentralized applications (dApps).

“A rollback attack is a cyber attack that aims to undermine the security of a blockchain network by manipulating its transaction history and exploiting vulnerabilities. Attackers can effectively roll back the blockchain to a previous state or configuration, reversing transactions and gaining unauthorized access or privileges.”

Blockchain security relies heavily on transaction immutability, supported by decentralized control and consensus mechanisms. Rollback attacks threaten the integrity of the blockchain by directly undermining its immutability, reverting the chain to a previous state. These attacks can roll back a few blocks, affecting recent transactions, or go even further in larger attacks, causing more significant disruptions.

This article covers how rollback attacks work, their impact, and mitigation practices. It also explores the future of blockchain security in the context of rollback attacks.

Rollback Attack, Explained

Malicious actors use rollback attacks to force a blockchain back to a previous state, often to exploit vulnerabilities or destroy and recreate transactions. Attackers undo blocks and reverse recent transactions, allowing them to spend the same assets twice or gain unauthorized access. A 51% attack, for example, is often an attempt to do a rollback attack. 

Attackers gain control of the majority of the blockchain’s computational power and can rewrite transaction history, cancel blocks, and alter the blockchain’s structure for their benefit. Rollback attacks exploit these weaknesses to manipulate the blockchain’s past and undermine its security.

Understanding Blockchain Forks

Blockchain forks are splits in the network that create two versions of it. They can be intentional or not, with good or bad purposes. They can happen when developers disagree on the future of the blockchain’s protocol, but they can also occur as a consequence of an attack. In fact, a fork can allow bad actors to perform a rollback attack.

There are two types of forks:

  • Soft forks: These forks do not require all nodes to upgrade to the blockchain’s new version and involve backward-compatible protocol changes.
  • Hard forks: All nodes must upgrade to the new version. Nodes that do not upgrade risk becoming isolated from the network. When hard forks occur, the new blockchain version is permanent and can create a separate blockchain.

How Blockchain Forks Can Enable Rollback Attacks

When a blockchain initiates a fork, either for an upgrade or due to disagreements on the protocol, attackers may take advantage of the temporary instability. By launching an attack during this critical period, they can manipulate the system to create a malicious fork, reorganize the chain, and roll back transactions. 

This is particularly dangerous because the network may already be focused on resolving the fork, making it more susceptible to an attack that rewrites transaction history.

The Impact of Rollback Attacks

Rollback attacks can have several consequences for users, investors, and developers. Some of the most relevant are:

  • Financial losses: Double-spending is one of the most significant outcomes of a rollback attack. It happens when an attacker reverses a transaction after receiving goods or services, allowing them to spend the same funds again. Reversing legitimate transactions can cause major financial losses for individuals and businesses.
  • Affected trust: Trust and credibility issues are some of the most important consequences after a rollback attack. Blockchains work on the principle of immutability, and this characteristic attracts users and investors. When this immutability is affected, it leads to a lack of trust, which can cause massive losses, too. 
  • Impact on decentralized applications (dApps): Rollback attacks disrupt dApps on the affected blockchain. These attacks can cancel user transactions and the dApp, leading to lost assets, broken services, or reversed transactions. As a result, users may also lose trust in the application’s reliability.

Examples of Rollback Attacks

Rollback attacks can happen as a result of malicious and non-malicious intentions. Some of the most notable cases are the following:

Ethereum Hard Fork

For example, one of the most significant forks in blockchain history is the Ethereum hard fork, which led to the creation of Ethereum and Ethereum Classic (ETC). This was a non-malicious fork, but it had severe consequences. 

The fork occurred in 2016 after a major exploit in a decentralized autonomous organization (DAO) on Ethereum, resulting in the theft of $50 million worth of Ether (ETH). However, the fork was not the result of an attack; it was an intentional and highly debated decision within the community.

Bitcoin Gold Fork

Another example of a fork that led to an attack is the Bitcoin Gold (BTG) hard fork in 2017. Bitcoin Gold was created to make mining more accessible by switching to a new algorithm called Equihash. This algorithm allowed regular GPU mining instead of having to use application-specific integrated circuits (ASIC) to mine Bitcoin, which requires much more financial and physical resources.

In 2018, shortly after the fork, Bitcoin Gold suffered a 51% attack. The attackers gained control of more than half of the network’s computing power, allowing them to reverse transactions and spend the same coins twice. This rollback attack caused millions of dollars in losses, especially for exchanges that handled Bitcoin Gold transactions.

Equihash was intended to decentralize mining, but the attack highlighted vulnerabilities in the network’s security.

Mitigating Rollback Attacks

Blockchain networks can take measures to defend themselves against rollback attacks by strengthening their security. Unfortunately, sometimes, when blockchains are trying to implement some changes, it is precisely when they may become more vulnerable and fall victim to a rollback attack. Some practical measures include:

  • Increasing network hash rate: A higher network hash rate, which is the total computational power used to mine and secure the blockchain, makes it more difficult for attackers to gain control of the majority of computing power.
  • Implementing finality protocols: These protocols can prevent attacks by establishing rules that make transactions immutable or non-reversible, adding an extra layer of security that makes it harder for attackers to manipulate the blockchain.
  • Robust consensus mechanisms: Proof-of-work (PoW) and proof-of-stake (PoS) mechanisms help prevent malicious actors from gaining control of the network. They require significant computational power or stake resources, making attacks expensive and difficult to execute.

Future of Blockchain Security in the Context of Rollback Attacks

The future of blockchain security will rely on ongoing advancements to prevent rollback attacks and protect transaction integrity. Innovations in securing transaction finality with stronger protocols will play a key role. Strengthening network decentralization through consensus mechanisms like proof-of-work and proof-of-stake can further enhance security, and new layers of protection could be added to these systems. 

Regulatory responses to rollback attacks can play a crucial role in preventing them and safeguarding blockchain networks. The combined measures, such as securing transaction finality, enhancing consensus mechanisms, and introducing potential regulatory actions, highlight the importance of the blockchain community working together to find solutions.

Rollback attacks can impact various stakeholders, including institutions, individuals, developers, and investors. A collective effort is essential to address these vulnerabilities and maintain trust in the blockchain ecosystem.

Conclusion

Rollback attacks are a major threat to blockchain networks. Attackers can use them to reverse transactions, enable double-spending, and compromise the security of decentralized systems, deeply affecting the blockchain. Both planned and unexpected forks can create opportunities for these attacks, as seen with Ethereum and Bitcoin Gold.

To prevent rollback attacks, blockchain networks need stronger security. Increasing the network’s hash rate, using finality protocols, and relying on Proof-of-Work or Proof-of-Stake consensus mechanisms can help reduce the risk. Future improvements in blockchain security and potential regulations can also play a key role in providing protection.

All actors in the blockchain community play an important role in addressing these issues and strengthening the ecosystem.

FAQs

Can a rollback attack happen on any blockchain?

Yes, any blockchain can theoretically experience a rollback attack, but it is more common on smaller or less decentralized networks where it is easier to gain control of the consensus process.

Is a rollback attack the same as a hard fork?

No, a rollback attack is a malicious act to reverse transactions, while a hard fork is typically a planned upgrade or split in the blockchain protocol, not meant to undo past transactions.

What is the difference between an unintentional fork and a malicious fork?

An unintentional fork happens when two miners/validators produce blocks simultaneously, which is quickly resolved by the network, while a malicious fork is created intentionally to reorganize the blockchain for an attack.

Can users protect their transactions from rollback attacks?

Users cannot directly prevent rollback attacks but can take precautions by waiting for a higher number of confirmations before considering a transaction final, especially in less secure networks.

 

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