1. Introduction

1.1 Background and Significance

Since its launch in 2015, Ethereum has quickly emerged as a core force in the cryptocurrency field, occupying a pivotal position in the blockchain ecosystem. Ethereum is not just a cryptocurrency, but more importantly, it is an open-source public blockchain platform with smart contract functionality, providing developers with a powerful environment to build and deploy decentralized applications (DApps).

From a market perspective, Ethereum’s native cryptocurrency Ether (ETH) has long been one of the top cryptocurrencies in the market, second only to Bitcoin, and is one of the main cryptographic assets widely watched and traded by global investors. A large amount of funds flows into the Ethereum market, where both institutional and individual investors seek investment opportunities within the Ethereum ecosystem. Its price fluctuations have a significant impact on the overall cryptocurrency market trends.

In terms of technological innovation, Ethereum pioneered smart contracts, allowing developers to write and deploy automated contract code on the blockchain. This innovation greatly expands the application boundaries of blockchain technology, moving beyond simple digital currency transactions to areas such as finance, supply chain, healthcare, gaming, and more. For example, in the decentralized finance (DeFi) sector, various applications built on Ethereum such as lending, trading, insurance, etc., are flourishing, providing users with more open, transparent, and efficient financial services, reshaping the landscape of traditional finance. In the non-fungible token (NFT) sector, Ethereum has also become the primary platform for digitizing unique assets like digital art pieces, collectibles, etc., driving the prosperity of the digital asset market.

However, with the rapid development and continuous expansion of the Ethereum ecosystem, security issues are becoming increasingly prominent. Security incidents such as smart contract vulnerabilities, network attacks, improper private key management, etc., occur frequently, causing significant losses to investors and developers. For example, in 2016, the infamous The DAO incident, where hackers exploited vulnerabilities in smart contracts to successfully steal over 50 million US dollars worth of Ether, shocked the entire blockchain industry. This not only led to a hard fork of Ethereum but also triggered a profound reflection on the security of smart contracts. Similar incidents abound, such as the 2017 Parity wallet multi-signature vulnerability resulting in losses of around 150 million US dollars, as well as the ongoing attacks on DeFi projects in recent years, all indicating the severe challenges facing Ethereum’s security.

Therefore, researching the security of Ethereum is of utmost practical significance. For investors, a deep understanding of Ethereum’s security mechanisms and potential risks can help them make wiser investment decisions, effectively protecting their asset security. For developers, mastering Ethereum’s security technologies and best practices can enhance the security of smart contracts and decentralized applications, reduce the risks of vulnerabilities and attacks, and promote the healthy development of the Ethereum ecosystem. From the perspective of the entire blockchain ecosystem, safeguarding the secure and stable operation of Ethereum helps strengthen people’s trust in blockchain technology, drive the application and popularization of blockchain technology in more fields, and lay the foundation for building a more fair, transparent, and efficient digital economy system.

2. Ethereum Overview

2.1 The Development History of Ethereum

The development history of Ethereum is full of innovation and change, which vividly reflects the continuous evolution of blockchain technology. Its origins can be traced back to 2013, when Vitalik Buterin, only 19 years old at the time, published the Ethereum whitepaper, detailing the vision and design concepts of Ethereum. Vitalik envisioned building a decentralized platform based on blockchain technology that not only facilitates cryptocurrency transactions but also supports the development and operation of various decentralized applications (DApps). This groundbreaking idea laid the theoretical foundation for the birth of Ethereum.

In January 2014, Vitalik actively promoted Ethereum at the North American Bitcoin Conference in Miami, attracting many like-minded individuals. The founding team of Ethereum was initially established, consisting of Vitalik and 7 other co-founders. In the same year, one of the co-founders, Gavin Wood, proposed the concept of Web3, further enriching Ethereum’s ecological vision and emphasizing users’ autonomous control over digital identity and assets. In June 2014, Vitalik decided to build Ethereum as a non-profit organization, initiating the establishment of the Ethereum Foundation. The foundation aims to gather resources from all parties, promote the infrastructure construction of Ethereum, fund development projects, and provide organizational support for the long-term development of Ethereum.

On July 24, 2014, Ethereum launched a 42-day presale event, which attracted widespread attention from global investors. The huge success of the presale raised a large amount of funds for the Ethereum project, providing a solid material foundation for subsequent technical development and network construction. On July 30, 2015, a milestone event occurred with the release of the Ethereum Frontier network, marking the official operation of the Ethereum blockchain. At this stage, Ethereum mainly targeted blockchain developers, with node participants involved in the network through mining, and the network supported the deployment of smart contracts. Although the initial user interface was rough and operations had to be executed through the command line, it provided a platform for developers to explore and practice, kicking off Ethereum’s development journey.

On March 14, 2016, Ethereum released the second stage network Homestead, which was Ethereum’s first hard fork and an important milestone in its development. This version optimized smart contracts, introduced new code for the smart contract language Solidity, and released the desktop wallet Mist, greatly improving user experience. This allowed ordinary users to more conveniently hold, trade ETH, write, deploy smart contracts, and propel Ethereum from the developer stage towards a broader user base.

On June 18, 2016, Ethereum faced a major challenge when The DAO project on the platform was hacked. The hacker exploited vulnerabilities in the smart contract and successfully stole around 100 million US dollars worth of Ether. This event shocked the entire blockchain industry, leading to wide attention and discussions. In order to compensate for investors’ losses, after intense discussions within the Ethereum community, the majority of participants decided to carry out a hard fork, modify the consensus rules, recover the stolen ETH in wallets, and patch the vulnerabilities. However, this hard fork did not receive unanimous approval from all members within the community. Some participants continued mining and trading on the original chain, leading to Ethereum splitting into two separate blockchains: ETH and Ethereum Classic (ETC).

In 2017, Ethereum entered an important stage of development, and the Metropolis upgrade plan began to be implemented. The upgrade plan is rich in content and is divided into two stages: Byzantium and Constantinople. In October 2017, the Byzantium upgrade was successfully completed. This upgrade allowed for the Revert operation, was compatible with the ZK-Snarks (Zero-Knowledge Proof) algorithm, postponed the difficulty bomb by one year, and reduced the block reward from 5ETH to 3ETH. These improvements enhanced the security and efficiency of the Ethereum network, laying the foundation for subsequent development. Throughout 2017, the cryptocurrency market saw a boom in Initial Coin Offerings (ICOs), and ICO projects based on the Ethereum platform emerged in large numbers. A large number of projects raised funds on Ethereum by issuing tokens. This trend caused the price of ETH to soar, reaching as high as $1400. Ethereum and its ecosystem successfully broke through, attracting more attention from investors and developers worldwide, further consolidating its position in the blockchain field.

On February 28, 2019, the Constantinople hard fork was triggered, which includes a total of 5 protocol upgrades: EIP 1234, EIP145, EIP 1014, EIP 1052, and EIP 1283. These protocols optimize gas fees, reducing users’ transaction costs; delay the ‘difficulty bomb,’ giving Ethereum more time to transition to a Proof of Stake (PoS) consensus mechanism; improve the efficiency of verifying smart contracts, reduce block rewards, introduce a PoW+PoS consensus mechanism, significantly enhancing Ethereum’s performance and security.

At the end of 2019, Ethereum began its journey towards version 2.0, which is a comprehensive and profound transformation aimed at addressing many issues such as scalability, security, and energy consumption that Ethereum currently faces. Ethereum 2.0 is planned to be rolled out in at least three phases: Phase 0 launched in 2020, focusing on getting validators up and running on the Beacon Chain, which is a brand new PoS blockchain and a core component of Ethereum 2.0, laying the foundation for subsequent upgrades; Phase 1 and Phase 2 will be released in the coming years, completing the tasks of launching shard chains and launching the execution layer, improving Ethereum network’s processing capabilities through sharding technology, achieving higher throughput and lower transaction fees, thus meeting the growing demands of decentralized applications.

In April 2021, Ethereum underwent the Shanghai upgrade, aiming to improve network efficiency, reduce transaction fees, and further enhance user experience. In 2023, Ethereum’s development continues to advance, with plans for more upgrades and improvements in the future, such as the anticipated Caary upgrade in the fourth quarter, which aims to further optimize network performance and introduce new features to adapt to evolving market demands and technological trends.

2.2 Ethereum’s technical architecture

The technical architecture of Ethereum is the core support for realizing decentralized applications and smart contract functions, integrating a variety of advanced technological concepts and innovative designs, mainly including blockchain, smart contracts, Ethereum Virtual Machine (EVM), and consensus mechanisms, etc., the components cooperate with each other to jointly ensure the stable operation and powerful functions of the Ethereum platform.

Blockchain is the underlying technology of Ethereum, which is a distributed ledger composed of a series of data blocks arranged in chronological order. Each data block contains multiple transaction records and the hash value of the previous block. This chain structure gives blockchain the characteristics of immutability and traceability. In Ethereum, the blockchain not only records the transaction information of Ether, but also stores the code and state of smart contracts. When a user initiates a transaction, the transaction information is broadcast to various nodes in the Ethereum network. The nodes verify and confirm the transaction through a consensus mechanism. Once the transaction is confirmed, it is packaged into a new block and added to the blockchain. In this way, Ethereum achieves decentralized recording and storage of transactions, ensuring the security and reliability of the data.

Smart contracts are one of the core innovations of Ethereum, which are self-executing contracts stored on the blockchain, consisting of code and data. The code of smart contracts defines the rules and logic of the contract, while the data contains the state and variables of the contract. Smart contracts are written in programming languages such as Solidity, and developers can write various complex contract logics according to specific business needs. For example, in decentralized finance (DeFi) applications, smart contracts can implement functions such as lending, trading, and insurance; in the field of non-fungible tokens (NFT), smart contracts can define the ownership and transaction rules of digital assets. The execution of smart contracts is automatically triggered. When the conditions set in the contract are met, the contract code will be automatically executed on the Ethereum virtual machine, without the need for third-party intervention, thus achieving the automation and trust of transactions.

The Ethereum Virtual Machine (EVM) is the execution environment for smart contracts. It is a stack-based virtual machine that provides an isolated and secure execution space for smart contracts. The EVM can be understood as software running on an Ethereum node, capable of interpreting and executing smart contract bytecode. Each Ethereum node contains an EVM, and when a smart contract is deployed on the blockchain, its bytecode is stored in the blockchain. When the contract is called, the EVM reads the contract bytecode from the blockchain and executes the contract code in instruction order. The design of the EVM allows smart contracts to run in the same way on different Ethereum nodes, ensuring consistency and reliability of contract execution. Additionally, the EVM provides a series of security mechanisms such as memory management and permission control to prevent malicious attacks and resource abuse between smart contracts.

The consensus mechanism is a key technology to ensure data consistency among nodes in the Ethereum network. In the development of Ethereum, different consensus mechanisms have been adopted. In the early days, Ethereum used the Proof of Work (PoW) consensus mechanism, under which miners compete to solve complex mathematical problems to compete for the right to create new blocks. Only miners who successfully solve the mathematical problem can add a new block to the blockchain and receive corresponding Ether rewards. The advantage of the PoW mechanism is its high security and decentralization, as attackers need a significant amount of computing resources to attack the network. However, the PoW mechanism also has some obvious drawbacks, such as high energy consumption and slow transaction processing speed. To address these issues, Ethereum is gradually transitioning to the Proof of Stake (PoS) consensus mechanism. In the PoS mechanism, validators stake a certain amount of Ether to gain the right to validate transactions and create new blocks. The system selects validators based on factors such as the amount of Ether staked and the holding time. Compared to the PoW mechanism, the PoS mechanism has lower energy consumption, higher transaction processing efficiency, while maintaining high security and decentralization.

In addition to the above core components, Ethereum also includes some other important technical modules, such as the P2P network, account and key management, Gas mechanism, etc. The P2P network is used to realize communication and data transmission between Ethereum nodes, ensuring timely sharing of transaction information and block data between nodes. Account and key management are responsible for managing user account information and private keys, ensuring the security of user assets. The Gas mechanism is a fee mechanism designed by Ethereum to prevent the abuse and waste of smart contracts. Users need to pay a certain amount of Gas when executing smart contracts or conducting transactions, and the price and consumption of Gas depend on the complexity of the operation.

3. Ethereum Security Status

3.1 Cryptography Basics Protection

The security of Ethereum largely depends on its solid cryptographic foundation, mainly including key technologies such as Elliptic Curve Cryptography (ECC) and hash functions, which provide core security guarantees for Ethereum accounts and transactions.

Elliptic curve cryptography is an important part of the Ethereum cryptographic system, which is based on the elliptic curve discrete logarithm problem, with high security and efficiency. In Ethereum, elliptic curve cryptography is mainly used to generate account public-private key pairs. The user’s private key is a randomly generated 256-bit number, which, through elliptic curve multiplication operation with a fixed generator point, derives the corresponding public key. The public key is a point on the elliptic curve represented by a pair of coordinates (x, y). This encryption method based on elliptic curves makes it virtually impossible to derive the private key from the public key, ensuring the security of user accounts. For example, when a user initiates an Ethereum transaction, the transaction information is signed with the private key, and the recipient can verify the authenticity of the signature using the sender’s public key, ensuring that the transaction is indeed initiated by the user who owns the corresponding private key and that the transaction content has not been tampered with during transmission.

Hash functions also play a crucial role in Ethereum, with Ethereum primarily using the Keccak-256 hash function. Hash functions possess characteristics such as determinism, one-wayness, and collision resistance. In Ethereum, hash functions are widely applied in various aspects. Firstly, in the block structure of the blockchain, each block contains the hash value of the previous block. Through this chain structure, the immutability and traceability of the blockchain are ensured. Once the content of a block is tampered with, its hash value changes, causing inconsistencies in the hash values referenced by subsequent blocks, thereby compromising the consistency of the entire blockchain and making tampering easily detectable. Secondly, hash functions are used to calculate the hash value of transactions, with each transaction having a unique hash value for identification. In smart contracts, hash functions are also used to verify the integrity and consistency of contract code, ensuring that the contract has not been maliciously altered during deployment and execution.

In addition, Ethereum also uses hash functions to generate account addresses. The Ethereum account address is calculated from the public key through the Keccak-256 hash function. The specific process is to first hash the public key, and then take the last 20 bytes of the hash value as the account address. This method makes the account address unique and tamper-proof, allowing users to receive Ether and conduct transactions through the account address without worrying about the security risks of address tampering or forgery.

In conclusion, elliptic curve encryption and cryptographic technologies such as hash functions complement each other, forming the cornerstone of the security system of Ethereum. They play a crucial role in ensuring the security of Ethereum accounts, transaction security, as well as the integrity and immutability of blockchain data, enabling Ethereum to operate securely and reliably in a decentralized environment, providing users with a high level of trust assurance.

3.2 Security Considerations for Consensus Mechanism

3.2.1 Security features of PoW mechanism

Proof of Work (PoW) mechanism is the consensus mechanism adopted by Ethereum in the early days, which has unique characteristics and principles in ensuring the security of the Ethereum network.

The core principle of the PoW mechanism is to allow miners to compete to solve complex mathematical problems in order to compete for the right to create new blocks. In the Ethereum network, every node can participate in mining as a miner. When new transactions occur, these transactions are packaged into a candidate block, and miners need to perform hash calculations on this candidate block. The goal of hash calculation is to find a hash value that meets specific difficulty requirements, which are dynamically adjusted by the Ethereum network to ensure the average production of a new block every 15 seconds or so. In order to find the required hash value, miners need to continuously try different random numbers and perform hash calculations together with other data in the candidate block until they obtain a hash value that meets the difficulty requirements. This process requires a significant amount of computing resources and energy, as hash calculation is a completely random process with no shortcuts, only continuous attempts to find the answer.

However, the PoW mechanism also has some drawbacks, the most obvious of which is the huge energy consumption. Since mining requires a large amount of computing resources and energy, this not only puts a certain amount of pressure on the environment, but also makes mining costs high, limiting more nodes from participating. In addition, the transaction processing speed of the PoW mechanism is relatively slow. With the continuous increase in transaction volume on the Ethereum network, network congestion issues are becoming more serious, transaction confirmation times are getting longer, affecting user experience. These issues have prompted Ethereum to gradually transition to the Proof of Stake (PoS) mechanism.

3.2.2 Security Advantages and Challenges of the PoS Mechanism

The Proof of Stake (PoS) mechanism is a new consensus mechanism gradually introduced by Ethereum to solve many problems of the Proof of Work (PoW) mechanism. It has unique principles and advantages in improving security and stability, but also faces some potential attack risks.

The core principle of the PoS mechanism is to select validators based on the stake held by the nodes (i.e. the amount of Ether staked), rather than competing for the right to keep accounts through computational power as in the PoW mechanism. Under the PoS mechanism, users can stake their Ether into the Ethereum network to become validators. The system will calculate the stake weight of each validator based on factors such as the amount of Ether staked and the holding time. The higher the stake weight of a validator, the greater the probability of being selected to create new blocks and validate transactions. When a validator is selected to create a new block, they need to verify the transactions and package the verified transactions into a new block added to the blockchain. If the validator works honestly, verifies and packages transactions correctly, they will receive a certain amount of Ether as a reward; if the validator behaves maliciously, such as intentionally verifying incorrect transactions or attempting to tamper with the blockchain, their staked Ether will be deducted as a penalty.

In addition, the PoS mechanism faces some other challenges, such as the issue of stake centralization. If a few nodes hold a large amount of Ether and stake it, they may have a significant influence on the network, thereby reducing the decentralization of the network. To address this issue, the Ethereum community is constantly exploring and researching, proposing some improvement solutions, such as introducing sharding technology, dividing the blockchain into multiple shards, each validated by different validators, thereby reducing the influence of a single node on the entire network.

3.3 Security Status of Smart Contracts

3.3.1 Analysis of Security Vulnerabilities in Smart Contracts

Smart contracts, as one of the core applications of Ethereum, directly affect the stability of the Ethereum ecosystem and the security of user assets. However, due to the complexity of smart contracts, the difficulty of code writing, and the relative novelty of blockchain technology, smart contracts have exposed many security vulnerabilities in practical applications, some of which have led to serious security incidents and significant economic losses. The DAO incident is one of the most famous smart contract security incidents in Ethereum’s history, and it has had a profound impact on the development of Ethereum.

The DAO is a decentralized autonomous organization (DAO) based on Ethereum, which raises and manages funds through smart contracts. Users can invest Ether into The DAO contract and receive corresponding DAO tokens, which represent the user’s interests in The DAO. The original intention of The DAO’s smart contract design is to allow users to decide on the direction of fund investment through voting, achieving decentralized venture capital. However, on June 17, 2016, a hacker discovered a serious vulnerability in The DAO smart contract. Exploiting this vulnerability, the hacker successfully stole about 3.6 million Ether from The DAO contract, which was worth over 50 million USD at the time.

The principle of a hacker attack mainly exploits the reentrancy vulnerability in smart contracts. In The DAO’s smart contract, when a user requests to withdraw funds, the contract first sends the funds to the user, then updates the user’s balance. The hacker creates a malicious contract, utilizing the callback mechanism in the contract. During the window between the contract sending funds to the user and not yet updating the balance, the hacker calls the withdrawal function again, achieving the purpose of multiple fund withdrawals. Specifically, the malicious contract created by the hacker contains a callback function. When The DAO contract sends funds to the malicious contract, it triggers this callback function, which immediately calls The DAO contract’s withdrawal function again. Since the DAO contract has not updated the user’s balance at this point, it will send funds to the malicious contract again. This cycle continues, allowing the hacker to infinitely withdraw funds from The DAO contract.

The occurrence of The DAO incident not only brought huge economic losses to investors but also triggered a profound reflection within the Ethereum community on the security of smart contracts. This incident exposed many problems in the design and coding process of smart contracts, such as logical loopholes in the code, insufficient consideration of risks for external calls, and a lack of rigorous security audits. In order to recover the investors’ losses, after intense discussions, the Ethereum community ultimately decided to carry out a hard fork to retrieve the stolen Ether from the hackers and fix the vulnerabilities in the smart contracts. However, this hard fork also caused a split in the Ethereum community, with some people believing that the hard fork violated the immutability principle of the blockchain. They chose to stay on the original chain, thus forming Ethereum Classic (ETC).

In addition to The DAO incident, there have been many other smart contract security incidents, such as the 2017 Parity wallet multi-signature vulnerability, which led to a loss of about $150 million. In the Parity wallet incident, due to a function in the multi-signature contract being incorrectly set as publicly callable, hackers exploited this vulnerability to transfer funds from the Parity wallet to their own account. These security incidents demonstrate that smart contract security issues cannot be ignored, as even a small vulnerability can be exploited by hackers, leading to significant economic losses and a crisis of trust.

3.3.2 Security Audit and Verification for Smart Contracts

In order to address the increasingly severe security issues of smart contracts and ensure the stability of the Ethereum ecosystem and the security of user assets, security auditing and verification for smart contracts have become crucial. Formal verification tools and third-party audit firms play an indispensable role in this process.

Formal verification tools are a type of smart contract verification technology based on mathematical methods. It converts the code of smart contracts into mathematical models and then uses rigorous mathematical reasoning and proofs to verify whether the contracts satisfy specific security properties and functional requirements. The core idea of formal verification is to use formal languages to describe the behavior and properties of smart contracts. By precisely analyzing and reasoning about these descriptions, it ensures the correctness and security of contracts in various scenarios. For example, by using theorem provers, model checkers, and other tools to analyze the code of smart contracts, it checks for common security issues such as reentrancy bugs, integer overflows, and improper permission control. The advantage of formal verification is its ability to provide high accuracy and reliability, detecting potential vulnerabilities and logical errors that traditional testing methods may overlook. However, formal verification also has certain limitations. It requires high technical expertise, specialized knowledge, and skills to use. The verification process is often complex and time-consuming. For large-scale smart contract projects, it may require significant computational resources and time.

Third-party audit firms also play an important role in ensuring the security of smart contracts. These professional audit firms have rich experience and professional security teams, capable of conducting comprehensive and in-depth audits of smart contracts. They typically use a variety of methods and tools, combining manual review and automated analysis to conduct detailed checks on the code of smart contracts. During the audit process, auditors carefully examine the logic, functionality, security mechanisms, and other aspects of smart contracts to identify potential vulnerabilities and risks. For example, they check whether the contract’s permission controls are reasonable, whether there is unauthorized access; whether there are risks of integer overflow or underflow in mathematical operations within the contract; whether the handling of external calls in the contract is secure, and whether there are vulnerabilities to reentrancy attacks, etc. Third-party audit firms also provide detailed reports and recommendations based on the audit results, helping developers to timely identify and fix security issues in smart contracts. Some well-known third-party audit firms, such as OpenZeppelin, ConsenSys Diligence, etc., have high reputation and influence in the blockchain industry, and their audit services have been recognized and adopted by numerous projects.

In addition to formal verification tools and third-party audit firms, developers of smart contracts should also take a series of security measures to enhance the security of the contracts. Firstly, developers should follow secure coding standards and write high-quality, secure code. For example, avoid using unsafe functions and operations, design the logic and structure of the contract reasonably, and ensure the readability and maintainability of the code. Secondly, developers should conduct thorough testing, including unit testing, integration testing, fuzz testing, etc., to discover and fix potential vulnerabilities through various testing methods. Additionally, developers can refer to some mature smart contract templates and libraries, which usually undergo rigorous security reviews and testing, providing a certain level of security assurance.

In conclusion, security audit and verification for smart contracts is a comprehensive task that requires formal verification tools, third-party audit institutions, and the joint efforts of developers. By combining various means, it is possible to effectively enhance the security of smart contracts, reduce security risks, and ensure the healthy development of the Ethereum ecosystem.

4. Threats to ETH Security

4.1 External Attack Threat

4.1.1 Hacker Attack Methods and Cases

As an important platform in the blockchain field, Ethereum has attracted the attention of many hackers who use various sophisticated attack methods to seek profits, bringing significant security risks to the Ethereum ecosystem. Reentrancy attack is a common and highly destructive hacking technique based on vulnerabilities in the execution mechanism of smart contracts. In Ethereum smart contracts, when a contract calls an external function, the execution flow temporarily shifts to the external function and then returns to the original contract upon completion. Reentrancy attacks exploit this feature where attackers carefully craft malicious code to call relevant functions of the contract again during the gap between calling an external function and completing state updates, enabling multiple repetitions of certain operations to steal funds or disrupt the normal operation of the contract.

4.1.2 Malware and Phishing Risks

Malware and phishing are another major security threat faced by Ethereum users, which cleverly steal users’ private keys and other important information, posing serious risks to the security of users’ assets. Malware is a type of software designed specifically to steal user information, disrupt systems, or engage in other malicious activities. In the Ethereum ecosystem, malware often masquerades as legitimate software or applications, enticing users to download and install it. Once installed, the malware runs on the user’s device, quietly recording keystrokes, taking screenshots, monitoring network communications, and attempting to obtain the user’s Ethereum private key.

Malware and phishing attacks pose a serious threat to the asset security of Ethereum users. To prevent these attacks, users need to remain vigilant and enhance their security awareness. Users should only download Ethereum-related software and applications from official and trusted sources, avoiding downloading and installing software from unknown sources. When using an Ethereum wallet, ensure the security of the device, install reliable antivirus software and firewalls, and regularly update system and software security patches. At the same time, users should learn to identify phishing attacks, not easily click on links from unfamiliar sources, and avoid entering personal sensitive information on untrusted websites. If you receive suspicious emails or messages, promptly verify with relevant institutions to ensure the authenticity of the information.

4.2 Internal Mechanism Risks

4.2.1 Design Flaws in Smart Contracts

Smart contracts, as a core component of Ethereum, directly affect the stability of the Ethereum ecosystem and the security of user assets. However, due to the complexity of smart contracts and various factors in the development process, there may be various defects in the design of smart contracts, which hackers could exploit, leading to serious security issues. Logical errors are one of the common problems in smart contract design. During the development process of smart contracts, developers need to write complex code logic according to specific business requirements to implement various functions of the contract. However, due to human error or insufficient understanding of the business logic, logical errors may occur in the contract code. These logical errors may manifest as incorrect conditional judgments, improper loop controls, or unreasonable state machine designs.

4.2.2 The Potential Risks of Consensus Mechanisms

Ethereum is gradually transitioning from the Proof of Work (PoW) consensus mechanism to the Proof of Stake (PoS) consensus mechanism. Although significant progress has been made in improving efficiency and reducing energy consumption, the PoS mechanism also brings some potential risks, which pose certain threats to the security and decentralization of the Ethereum network. Under the PoS mechanism, validators stake a certain amount of Ether to obtain the right to validate transactions and create new blocks. The system selects validators based on factors such as the amount of Ether staked and the holding time. This mechanism significantly affects the distribution of stakes on the network’s security and decentralization. If a large amount of stake is concentrated in the hands of a few validators, centralization issues may arise.

Centralization of equity may lead to a decrease in the decentralization of the network, as a few validators have significant influence and can dominate the decisions and operations of the network. This contradicts the decentralization concept pursued by Ethereum and may raise concerns about the fairness and security of the network among users. Centralization of equity also increases the risk of network attacks. If an attacker can control a large amount of equity, they may launch attacks such as double-spending or tampering with blockchain data. Although in the PoS mechanism, attackers need to stake a large amount of Ether, increasing the cost of the attack, once successful, the rewards they may gain could be substantial, which may still attract some criminals to attempt attacks.

In addition to the issue of equity centralization, the PoS mechanism also faces the ‘Nothing at Stake Problem.’ Under the PoS mechanism, validators’ profits mainly come from staking Ether and verifying transaction fees, without a direct interest in the security and stability of the network. This may lead validators to simultaneously validate on multiple forks when facing different blockchain forks, out of self-interest, as they will not incur losses regardless of which fork becomes the main chain, and may even receive more rewards. This behavior may lead to multiple forks in the blockchain, disrupting its consistency and stability, severely impacting the normal operation of the network.

To address these potential risks, the Ethereum community is constantly exploring and researching improvement measures. For example, introducing shard technology, dividing the blockchain into multiple shards, each validated by different validators, to reduce the influence of a single validator on the entire network and mitigate the risk of centralization; adopting stricter penalty mechanisms to harshly penalize validators who validate on multiple forks simultaneously to reduce the occurrence of ‘nothing-at-stake’ issue. In addition, further refinement of the PoS mechanism’s design is needed, optimizing stake distribution and validator selection algorithms to enhance network security and decentralization.

5. Ethereum security measures

5.1 Technical Protection Measures

5.1.1 Strengthening Encryption Algorithms

Ethereum has always regarded the enhancement of cryptographic algorithms as a key measure to improve security, continuously exploring and innovating in the field of cryptography to cope with increasingly complex security threats. With the rapid development of blockchain technology and the continuous expansion of application scenarios, traditional cryptographic algorithms are facing more and more challenges, such as the potential threat of quantum computing technology. Quantum computers have powerful computing capabilities and theoretically may crack existing encryption algorithms based on mathematical problems, posing a potential risk to the security of Ethereum. In response to this challenge, Ethereum is actively researching and exploring Post-Quantum Cryptography (PQC). Post-Quantum Cryptography aims to develop new encryption algorithms that can resist attacks from quantum computers. These algorithms are based on different mathematical principles, such as lattice-based cryptography, hash-based cryptography, multivariate cryptography, etc., and can maintain security in a quantum computing environment. Researchers and developers in the Ethereum community are closely monitoring the development of post-quantum cryptography, evaluating its applicability and feasibility in Ethereum, and preparing for possible algorithm upgrades in the future.

In terms of hash functions, Ethereum is also continuously optimizing. Hash functions are a core component of blockchain technology, used to ensure data integrity and tamper resistance. Ethereum currently mainly uses the Keccak-256 hash function, which has good security and performance. However, as technology advances, the security requirements for hash functions are also constantly increasing. Ethereum’s research team continues to conduct in-depth analysis and improvement of Keccak-256 to ensure its stable security in the face of various attack methods. At the same time, they are also paying attention to new research results on hash functions, exploring whether there are better hash functions that can be applied to Ethereum to further enhance the security and efficiency of the blockchain.

In addition, Ethereum also focuses on the implementation details of encryption algorithms and the repair of security vulnerabilities. In practical applications, even if encryption algorithms with good security performance, if there are vulnerabilities in the implementation process, attackers may exploit them. Ethereum developers follow strict security coding standards, conduct meticulous reviews and testing of the implementation code of encryption algorithms to ensure code correctness and security. Once security vulnerabilities in the implementation of encryption algorithms are discovered, the Ethereum community will respond promptly, release security patches in a timely manner, fix the vulnerabilities, and ensure the secure operation of the Ethereum network.

5.1.2 Security Design and Review of Smart Contracts

The secure design and review of smart contracts are core links to ensure the security of the Ethereum ecosystem, directly related to the security of user assets and the stability of the entire ecosystem. In the development process of smart contracts, it is essential to follow strict security standards. Developers should adhere to the principles of concise and clear programming, avoid writing overly complex code logic, as complex code is often more prone to hiding vulnerabilities and difficult to audit and test effectively. For example, when dealing with complex business logic, developers should break it down into multiple simple functions and modules, with each module focusing on implementing a single function. This not only facilitates code maintenance and debugging but also helps reduce security risks.

Introducing an effective permission control mechanism is a key aspect of secure smart contract design. By setting access modifiers such as public, private, and internal appropriately, different users’ access to functions and data in the contract can be precisely controlled. Only authorized users can perform specific operations, thereby preventing unauthorized access and malicious operations. For example, in a smart contract involving fund management, only the contract owner or authorized administrators can withdraw funds and modify important parameters, while regular users can only perform query operations, effectively protecting the security of the funds.

Strict data validation and input validation are also important aspects of secure smart contract design. For the input data provided by users, smart contracts should undergo comprehensive validation to ensure that it meets the expected format and requirements. This includes checks on data types, lengths, ranges, and handling of special cases such as null values, zero values, and exceptional values. Through effective data validation, attackers can be prevented from exploiting vulnerabilities in smart contracts by using malicious inputs, such as integer overflow, buffer overflow attacks. For example, when processing the amount of user input, smart contracts should check whether the input is a positive integer and does not exceed the preset maximum value to avoid financial losses due to input errors or malicious inputs.

Regular security audits of smart contracts are an important means of identifying and fixing potential vulnerabilities. Security audits can be conducted using various methods, including static code analysis, dynamic symbolic execution, and formal verification. Static code analysis involves checking the syntax, structure, and semantics of the code to identify potential security vulnerabilities, such as uninitialized variables, infinite loops, and other issues. Dynamic symbolic execution involves executing smart contract code and testing the code under various conditions to discover potential vulnerabilities, such as reentrancy attacks and improper permission control. Formal verification is a verification technique based on mathematical methods, which involves converting the smart contract code into mathematical models and then using rigorous mathematical reasoning and proofs to verify whether the contract satisfies specific security properties and functional requirements. It can provide a high level of accuracy and reliability, but it requires high technical proficiency, and the verification process is usually complex and time-consuming.

In addition to the above methods, the security review of smart contracts can also be assisted by professional third-party auditing firms. These firms have rich experience and professional security teams, capable of conducting comprehensive and in-depth audits of smart contracts. They will combine manual review and automated analysis tools to conduct detailed inspections of the code of smart contracts, identify potential vulnerabilities and risks, and provide detailed audit reports and improvement recommendations. Some well-known third-party auditing firms, such as OpenZeppelin, ConsenSys Diligence, have a high reputation and influence in the blockchain industry, and many Ethereum projects choose these firms for security audits before deploying smart contracts to ensure the security of the contracts.

5.2 User-Level Security Recommendations

5.2.1 Wallet Security Selection and Usage

In the Ethereum ecosystem, wallets are important tools for users to store and manage Ether assets, and the security of wallet selection and use is directly related to the security of user assets. Ethereum wallets are mainly divided into hot wallets and cold wallets, each with their own characteristics in terms of security and convenience. Users should make reasonable choices based on their own needs and risk tolerance.

A hot wallet is an online wallet that requires internet connection to use. Its advantages include convenience and the ability for users to conduct transactions anytime, anywhere. Common hot wallets include MetaMask, MyEtherWallet, etc., which are usually in the form of browser plugins or mobile applications. Users can directly access and manage their Ethereum accounts in browsers or on mobile phones. The security of a hot wallet mainly depends on the security of the device and the user’s operating habits. To ensure the security of a hot wallet, users should download wallet applications from official and trusted sources, avoid downloading from untrusted websites or sources to prevent malicious software or phishing wallets. When using a hot wallet, users should protect their devices, install reliable antivirus software and firewalls, regularly update system and software security patches to prevent hacking attacks. Additionally, setting a strong password is crucial, which should include uppercase and lowercase letters, numbers, and special characters, be at least 8 characters long, and avoid using easily guessable passwords like birthdays or phone numbers. Furthermore, to enhance account security, it is recommended to enable two-factor authentication, such as SMS verification codes, Google Authenticator, etc., so even if the password is compromised, hackers cannot easily access the user’s account.

A cold wallet is an offline storage wallet that is not connected to the network, greatly reducing the risk of being hacked and ensuring high security. Common types of cold wallets include hardware wallets (such as Ledger Nano S, Trezor, etc.) and paper wallets. A hardware wallet is a hardware device specifically designed for storing cryptocurrencies, storing the private key on the hardware device, and requiring confirmation on the device for transaction signing. Even when the device is connected to the network, the private key is not exposed. A paper wallet prints the private key and public key on paper, which users need to store securely to avoid loss or leakage. When using a cold wallet, users need to ensure the safekeeping of the wallet device or paper to prevent loss, damage, or theft. For hardware wallets, it is important to set a strong password and regularly back up the wallet’s mnemonic phrase, as the mnemonic phrase is crucial for wallet recovery. If lost, the assets in the wallet cannot be retrieved. For paper wallets, they should be kept in a secure place to prevent unauthorized access.

Whether you choose a hot wallet or a cold wallet, users should pay attention to protecting their private keys and mnemonics during use. The private key is the unique credential to access Ethereum accounts. Once leaked, others can freely transfer the assets in the user’s wallet. Mnemonics are another form of expression of private keys and are equally important. Users should avoid entering private keys and mnemonics in unsafe environments, such as public networks, untrusted devices, etc. Also, do not disclose private keys and mnemonics to others, even if they claim to be Ethereum official customer service or other trusted individuals. Ethereum official will not ask for users’ private keys and mnemonics in any way. If you need to back up private keys or mnemonics, it is recommended to use offline backup methods, such as writing mnemonics on paper, storing them in a secure place, avoiding electronic documents or cloud storage for backup to prevent hacking.

5.2.2 Methods to Prevent Phishing and Malware

In the process of using Ethereum, users face serious threats from phishing attacks and malware, which may lead to the leakage of important information such as users’ private keys and mnemonics, resulting in asset losses. Therefore, it is crucial to have an effective approach to prevention. Identifying phishing attacks requires a high level of vigilance and careful screening of various sources of information. Phishing attacks are often carried out by sending fake emails, text messages, social media messages, or creating fake websites, among other things. These fake messages are often disguised as trusted entities such as official Ethereum institutions, well-known exchanges, and wallet service providers to attract users’ attention. For example, phishing emails may lure users into clicking on a link with tempting content such as “There is a security issue with your Ethereum account, please click on the link to verify it now”, “Congratulations on winning an Ethereum reward, please click on the link to claim it”. Once users click on these phishing links, they are directed to a fake website that closely resembles the real one. This fake website mimics the interface and functionality of the real website and asks users to enter sensitive information such as Ethereum private keys, seed phrases, passwords, and more. Once the user enters this information without their knowledge, the hacker can obtain this information and then take control of the user’s Ethereum account and steal the user’s assets.

To prevent phishing attacks, users need to learn to identify phishing links first. Phishing links usually have some characteristics, such as misspelled domain names, using similar but different domains from official websites, and strange parameters in the link. For example, the domain of the official Ethereum website is ethereum.orgHowever, phishing websites may use ethereum.com“ or “ethereum-org.comDomain names such as ‘等类似的域名’ are used to confuse users. Before clicking on any links, users should carefully check the domain name to ensure it matches the official website. If unsure about the authenticity of a link, users can check relevant information through official channels such as the Ethereum official website, social media accounts, etc., to confirm if there are any related notifications or announcements. In addition, users should not easily trust information from unknown sources, especially information related to funds, account security, and other important content. If receiving suspicious emails or messages, do not click on any links or reply to the information, instead, promptly mark it as spam or delete it.

Preventing malicious software is also an important part of ensuring the security of Ethereum. Malicious software is a type of software designed specifically to steal user information, disrupt systems, or engage in other malicious activities. In the Ethereum ecosystem, malicious software often disguises itself as legitimate software or applications, enticing users to download and install it. Once the user installs the malicious software, it runs on the user’s device, quietly recording the user’s keystrokes, taking screenshots, monitoring network communications, and attempting to obtain the user’s Ethereum private keys. To prevent downloading malicious software, users should only download Ethereum-related software and applications from official and trustworthy sources. For example, when downloading an Ethereum wallet, it should be downloaded from the official wallet website or reputable app stores, avoiding downloads from untrustworthy websites or forums. Before downloading software, check the developer information, user evaluations, etc., to ensure the trustworthiness of the software. Additionally, users should install reliable antivirus software and firewalls, and regularly update virus databases and system security patches. Antivirus software can monitor the operation of the device in real time, detect and remove malicious software; firewalls can block unauthorized network access, protecting the device’s network security. In addition, when using an Ethereum wallet, users should pay attention to the physical security of their device, to avoid loss or theft. If the device is lost, measures should be taken promptly, such as suspending the account or changing passwords, to prevent assets from being stolen.

5.3 Guarantee at the community and ecosystem level

5.3.1 Community Supervision and Vulnerability Bounty Program

The Ethereum community plays a crucial role in ensuring the security of Ethereum, with community supervision and bug bounty programs being important measures. Ethereum has a large and active developer community, security researcher community, and ordinary user community, with members distributed globally. They are passionate about the development of Ethereum and actively participate in the security maintenance of Ethereum. Community members closely monitor the operation of the Ethereum network through various channels, promptly identifying potential security issues and vulnerabilities. Once anomalies are discovered, they quickly discuss and exchange information within the community, sharing their findings and insights. For example, when community members discover abnormal transaction behavior or potential vulnerabilities in a smart contract, they will post relevant information on platforms such as the Ethereum community forum and social media groups to attract the attention of other members. Other members will analyze and verify this information, collectively discussing the severity of the issue and possible solutions. Through this community supervision mechanism, many potential security risks can be promptly identified and addressed, ensuring the stable operation of the Ethereum network.

5.3.2 Industry Cooperation and Security Standard Development

Against the backdrop of the rapid development of the blockchain industry, Ethereum actively collaborates with other projects to address security challenges and is committed to establishing unified security standards to enhance the overall security level of the blockchain ecosystem. As blockchain technology applications continue to expand, interactions between different blockchain projects are becoming increasingly frequent, such as cross-chain transactions, multi-chain applications, etc. These interactions bring new security risks that individual projects find difficult to deal with alone. Therefore, Ethereum collaborates with other blockchain projects to jointly research and address security issues. For example, in terms of cross-chain communication, Ethereum collaborates with some well-known cross-chain projects to explore secure and reliable cross-chain technical solutions, ensuring the security of asset transfers and information exchange between different blockchains. Through collaboration, parties can share security technologies and experiences to collectively address complex security threats and improve the risk resistance capabilities of the entire blockchain ecosystem.

6. ETH Security Development Trends

6.1 The impact of technical upgrades on security

6.1.1 Security Improvements for Ethereum 2.0

The upgrade of Ethereum 2.0 is an important milestone in the development of Ethereum. Its security improvements cover multiple key areas, providing a solid guarantee for the robust development of the Ethereum ecosystem. Sharding technology is a core innovation introduced in Ethereum 2.0, aimed at enhancing the network’s scalability and performance, while also having a positive and far-reaching impact on security. In the traditional Ethereum 1.0 architecture, all nodes need to process and verify each transaction, which not only limits the network’s processing power but also increases the risk of individual nodes being attacked. Sharding technology divides the Ethereum network into multiple parallel subnetworks, called shards. Each shard can independently process a portion of transactions and smart contracts, enabling parallel transaction processing. This means that the network’s throughput is greatly increased, and transaction processing speed is significantly accelerated.

From a security perspective, sharding technology reduces the load and pressure on individual nodes, making it difficult for attackers to disrupt the normal operation of the entire network by attacking a single node. Since transactions and data are distributed across multiple shards, attackers need to simultaneously attack multiple shards to cause substantial damage to the network, greatly increasing the difficulty and cost of the attack. For example, in an Ethereum network consisting of multiple shards, if an attacker wants to tamper with a transaction record, they would need to control nodes on multiple shards simultaneously, which is almost impossible to achieve in practice because each shard has numerous nodes participating in verification, and the nodes are independent of each other, making unified control difficult.

The introduction of the Proof of Stake (PoS) mechanism is another important aspect of security improvement in Ethereum 2.0. Unlike the traditional Proof of Work (PoW) mechanism, the PoS mechanism selects validators based on factors such as the amount of Ether coins staked and the holding time. Validators gain the right to validate transactions and create new blocks by staking a certain amount of Ether coins. This mechanism has significant advantages in enhancing security. First, the PoS mechanism reduces energy consumption because it does not require extensive hash calculations like the PoW mechanism, thereby reducing environmental impact and lowering mining costs. This allows more nodes to participate in the network, enhancing the decentralization of the network. A higher level of decentralization means a more secure network because attackers find it difficult to control a sufficient number of nodes to launch attacks.

Secondly, the PoS mechanism increases the cost of attackers’ misconduct through staking and penalty mechanisms. Under the PoW mechanism, attackers only need to invest computing resources to attempt to attack the network, while under the PoS mechanism, attackers need to stake a large amount of Ether. If the attack is detected, the staked Ether will be deducted, forcing attackers to carefully consider the risks and rewards before conducting attacks. For example, if an attacker attempts a double-spending attack or alters blockchain data, once discovered and confirmed by other validators, their staked Ether will be confiscated, resulting in significant economic losses for the attacker and effectively preventing malicious attack behaviors.

In addition, Ethereum 2.0 has also made security improvements in other aspects, such as optimizing smart contracts. The new features significantly improve the execution efficiency of smart contracts, enabling them to handle more complex business logic. There is also a significant improvement in security, reducing potential vulnerabilities and risks. For example, by improving the programming model and execution environment of smart contracts, strengthening the verification and review of contract code, making smart contracts more robust and reliable in the face of various attack methods.

Conclusion

For investors, before investing in Ethereum-related projects, it is essential to conduct comprehensive and in-depth research and analysis. It is important to fully understand the project’s technical principles, application scenarios, market prospects, and potential risks, and not rely solely on the project’s publicity and market hype. Pay attention to the project’s security audit reports to ensure that the project’s smart contracts have undergone rigorous scrutiny by professional audit firms and do not contain major security vulnerabilities. At the same time, diversify investments to avoid concentrating all funds in a single Ethereum project to reduce investment risks. Regularly monitor the dynamics of the Ethereum market and the development of projects, adjust investment strategies in a timely manner to respond to market changes and potential security risks.