General Security Principles in Blockchain

The study of blockchain security principles highlights the need to closely monitor the operation of distributed ledger technology (DLT) — the technology on which digital currencies that’s cryptocurrencies, such as Bitcoin, Ethereum, etc, and other digital assets were developed.

The technology is gaining attention all over the world and its use case pervades every human endeavor such as in health, agriculture, education, supply chain, logistics, Internet of Things (IoT), etc, bringing decentralization, transparency, accountability, auditability, anonymity, and integrity in its applications. Put simply, its use cases are drifting from cryptocurrencies to other sectors.

The blockchain industry is expected to witness exponential growth in the coming years and is projected to be valued at $20 billion by 2024. Most companies and countries are exploring the benefits of the industry and some have already adopted distributed ledger technology in their operations.

With the growing interest in technology, cybercriminals are getting more and more sophisticated in their vicious attacks. These attacks are quite severe and have forced several crypto exchanges to file for bankruptcy and blockchain networks to shut down completely.

It is estimated that cybercriminals within the short span of the DLT have stolen about $40 billion in its never-ending attacks. Blockchain developers need to implement every possible measure to secure blockchain networks and prevent these attacks. In this article, we will explore blockchain technology, and focus on security measures needed to protect it against cyber-attacks.

What Is Blockchain Technology?

Blockchain is a distributed ledger technology (DLT) that can receive, process, and store data through a network of connected computers (nodes) that serves as transaction (block) validators, using a peculiar consensus mechanism.

The blockchain is made up of blocks connected through cryptographic chains and stores records of transactions carried out in the blockchain network. Blocks are added to the network through an agreement algorithm known as the consensus mechanism, which are Proof of Authority, (PoA), Proof of Work, (PoW), Proof of Stake, (PoS), Delegated Proof of Stake, (DPoS), and mechanisms.

The consensus mechanism is an agreement algorithm used in the addition of blocks to the blockchain network. A blockchain system uses a consensus algorithm to validate transactions, build trust, and store transactions on the blocks. The block form is linked to the previous blocks and so on and gradually builds a chain of interconnected blocks.

There are several features of blockchain technology that underscore the uniqueness of the distributed ledger.

Features of Blockchain Technology

Decentralization

Blockchain technology enables decentralization through the participation of different computers (nodes) across a distributed network. Details of the transactions are not kept on a single centralized server but are distributed across different nodes.

To achieve total decentralization, the data is stored among a large number of network nodes. Users who rely on the blockchain platform can benefit from complete independence without barriers.

Security

Blockchains store data in blocks linked together using cryptography, providing the system with the highest level of security.

Since all transactions are instantly validated by the participating nodes, the decentralized structure completely excludes intrusions from intruders. No outsider can replace, erase, or edit the data stored on the network since blockchain provides immutability.

Transparency

Regarding financial processes, transparency is a crucial component. Blockchain guarantees complete transparency in the processing, management, and archiving of data.

The ledger maintains a record of every action taken on the network by the parties involved, making data conveniently available when proof is required.

Anonymity

A user can connect with a blockchain network anonymously by using several addresses that were randomly generated within the network.

Users’ private information is not tracked or kept by a centralized authority because it is decentralized. Blockchain technology offers a certain level of anonymity due to its distrustful environment.

What Are the Types of Blockchains?

Blockchain types focus on who can participate in the network and how data is accessed and shared among participants. Basically, three types of blockchain technology will be discussed in this section.

Private Blockchains

Private blockchains also known as permissioned networks, are for selected participants who must be allowed to operate on the blockchain by the network’s central administrator.

This blockchain uses the PoA consensus mechanism which validates transactions, grants authentication, and keeps records on the chain. Usually, the blockchain is patronized by businesses whose interactions are regulated by the network administrator. The network ensures the security of the system and user data. Examples are Hyperledger, and R3 Corda, among others.

Public Blockchains

Public blockchains or permissionless blockchains are popular within the crypto industry because of their decentralization (absence of a central administrator) and trustless nature.

This blockchain is open to the public and relies on a network of nodes to validate transactions on the network, using either PoW, PoS, or DPoS consensus algorithms.

If you are looking for freedom to carry out your transactions and remain anonymous, then public blockchain is right for you because the blockchain provides a permissionless environment. Examples are Bitcoin, Ethereum, Litecoin, and Cardano, among others.

Consortium Blockchain

The consortium blockchain is related to the private blockchain but also displays decentralization features of the public blockchain that is not governed by a central network administrator but is governed by a group or participants.

Under consortium blockchain, several participants are allowed to cut across several sectors, such as banks, supply chains, industries, regulatory bodies, etc.

What Is Blockchain Security?

Blockchain security is a comprehensive risk assessment process for a blockchain system or network to assure its safety from hacks, data breaches, and fraud.

We can ensure this security through the execution of cybersecurity frameworks, and security testing methodologies. With certain measures in place, blockchain solutions can be shielded from online scams, data breaches, and cyberattacks.

For safety to happen there is always something to do. And for the security of blockchain networks, there are basic security principles that need to be adopted. We will be going through them in this discussion.

Examples of Cyber Security Attacks

The blockchain is not flawless owing to various cyberattacks on the system in recent years. Cybercriminals are developing ways to exploit the flaws in blockchain technology and related systems; to steal data and resources.

Routing Assault

This blockchain attack seeks to extract vital data from users by delaying the propagation of blocks or by simply disconnecting some part of the blockchain network, thus isolating victims from the view of the network.

Hackers with the right tools can extract data as it is transferred between parties. Unfortunately, these anomalies are not obvious to blockchain users which makes them vulnerable to attacks.

Sybil Attack

The term Sybil was derived from a popular book that discusses multiple personality disorders.

Sybil attacks are initiated to overwhelm the target blockchain network with an excessive number of false identities, causing the system to collapse.

Phishing Attack

Blockchain technology has always been plagued with this age-old hacker strategy, where cybercriminals send phony but convincing-looking emails to wallet owners indiscreetly requesting their login details. Once they comply, their wallet addresses are vulnerable without remedy.

51% Attack

Validating blocks on the blockchain requires high energy supplied by the validating node which is rewarded for their tasks.

Now, if a miner or group of miners can obtain up to 51% of the mining energy for the validation of blocks then they can decide how blocks are added to the blockchain, thus, limiting the decentralization feature of the blockchain.

It is important to note that these are the major attacks on the blockchain network and there are numerous other cyber attacks not mentioned in this discussion. The widespread attacks show the enormous potential of this technology and everyone wants to reap from the industry including cyber criminals.

How to Mitigate Cyber Security Attacks?

Under this section, we will be exploring different measures needed by blockchain developers to secure their systems against the wiles of cyber criminals. These measures are not far-reaching and offer possible ways to reduce cyber attacks. They are as follows:

• The implementation of the cyber security framework
• Security testing methodologies (implementation of Penetration Testing)
• Smart contract bytecode vulnerability analysis
• Carrying out secure coding practices and checking code vulnerabilities
• Conducting a regular blockchain security audit
• Using Multi-factor authentication (MFA) will boost security, particularly for employees and other blockchain users. Yubikey offers high security for online trading activities and wallets.
• Evaluation of employees committed to the security of the blockchain network

Further, blockchain developers need to safeguard blockchain codes and also, carry out comprehensive risks assessment to ascertain the nature of their codes/programs. This is highly needed to ensure the protection of a blockchain network from data breaches and cyber-attacks.

Usually, cybercriminals look out for code errors and smart contract bugs to perpetuate their nefarious activities.

Challenges of Blockchain Security

Insecurity of Blockchain Endpoints

The majority of blockchain transactions have less secure endpoints, even though blockchain technology is difficult to hack, these endpoints leave room for cyber attacks, data breaches, and fraud.

Regulatory Concerns

The absence of defined regulatory norms is yet another concern regarding blockchain security. Since there is little standardization in the blockchain industry, it is difficult for developers to adopt best practices in the development of a blockchain network.

Inadequate Testing

Blockchain is increasingly being used in different sectors, despite historically only being used for bitcoin trades. The issue is that non-cryptocurrency applications frequently use untested, highly experimental software, making it possible for hackers to identify and exploit weaknesses.

Conclusion

The concept of blockchain security underscores the need for vigilance and sets in place stringent measures to mitigate exploitable vulnerabilities in the system which makes it non-immune to cyber attacks.

Therefore, it is imperative to invest in blockchain security through robust security audits by reputable agencies, conducting security testing methodologies, and checking for smart contract bugs.

In a nutshell, blockchain security, when implemented, makes it difficult for hackers to invade blockchain systems.