Blockchain technology is the technology of the future, and for good reasons, it has a long list of unique features. It’s no surprise that the industry is expanding, but so are the threats. While the underlying security features of blockchain make it resilient against attacks, they do not make it totally immune. We will discuss some very important areas you need to be aware of and keep a close eye on when you wish to use the technology.
What is blockchain technology?
Simply put, a “blockchain” is a set of time-stamped “blocks” containing digital data that are stored in a shared ledger using cryptographic principles. This digital data is made up of three parts: information about a transaction, information about the transaction’s participant, and special information (hash) that distinguishes each block from the others.
Special features of blockchain technology
1. Decentralised network:
A blockchain’s data record is maintained by a group of computers each of which runs independently and acts on a peer-to-peer basis. This data is decentralised since it is not regulated by a central body.
2. Distributed ledger:
Before being added to the “chain,” each “block” is checked by theoretically millions of computers spread across the network. As a result, any transaction that is introduced to the blockchain must go through a lengthy authentication process, making it more reliable than normal transactions.
3. Security and privacy:
Each blockchain consumer is given two cryptographic keys: a private and a public key. All users on the network have access to the public key, which is used to check request information and perform other tasks. However, the user’s identity is concealed by a particular function known as “digital signatures,” which serves as the private key of each individual user. Identity theft and data compromise are almost unachievable owing to the cryptographic security of authorized users in the network.
Only the “create” and “read” functions are supported by blockchain, which means that once data is stored in a blockchain, it cannot be changed without leaving a trace. If data in one block changes, data in all subsequent blocks change as well, necessitating network majority consensus, thus maximising data immutability.
5. Data provenance
The ownership of a digital asset registered on a blockchain can only be changed by the owner of the particular asset. Consequently, the assets’ sources can be traced, making them verifiable and reusable.
6. Prevention of data loss:
As data is entered into the system, it becomes freely accessible to the entire network, and no one can modify it without leaving their signature. So data never gets lost even if the individual user loses it.
What are the blockchain security issues that can cause trouble for you?
The security features of blockchain make the data recorded on it impervious, as well as shielded against single points of failures because of being decentralised. A blockchain is also almost impossible to hack due to cryptographic proofs and game theory consensus mechanisms. Even so, there still are a few blockchain security vulnerabilities, as discussed below, which aren’t resolved as of yet and you should keep an eye out for them to stay safe –
1. 51% attack:
A 51% attack is one of the most dangerous threats a blockchain network may experience because despite it being a pretty costly affair, the rewards of a successful attempt of the same are exceptionally high. A 51% attack refers to a community of miners owning more than half the network’s mining hash rate or computing power by invading a blockchain. Once the assaulters take control of the network, they can disrupt the process of registering new blocks by manipulating the larger proportion of the network’s computing power. The cybercriminals will have the ability to deter other miners from completing blocks, potentially allowing themselves to monopolise new block mining and collect all of the rewards. They may even reverse already completed transactions and make the buyer spend the required amount twice or more, where the extra currencies go into the pockets of the hackers.
2. Shortcomings of the Proof-of-Work mechanism
The traditional blockchain works on Proof-of-Work (PoW) consensus algorithms to verify transactions and add new blocks to the chain. In this, currency miners battle against each other to solve a complex mathematical problem and are incentivised for finding the fastest solution. Among other issues, this results in the problem of monopoly on mining. All validation processes are usually regulated by three mining pools around the world. As a matter of fact, as of 2020, China accounts for nearly 65.08% of Bitcoin mining. If these mining pools decide to become corrupt, not only the chances of a 51% attack will rise, but we’ll also be left with the same problems that we have had with conventional centralised currencies.
3. Vulnerabilities in the original code:
Despite the fact that blockchain technology has been around for over a decade, the codes are still not fully mature. Developers also often release code without sufficient testing on live blockchains due to the high demand and competition regarding the applications’ delivery. Since many blockchain implementations are decentralised, the risks are also higher due to the technology’s irreversibility.
4. Endpoint soft spots:
Anyone experienced with the technology of blockchain in Australia knows how powerful the security features of blockchain are. Hackers, however, keep evolving with the advancement of technology and keep finding new ways to penetrate the fortress.
The cybercriminals who cannot attack the chain, attack the users by striking at the endpoint level, i.e., the mobile devices or computers which cannot be protected by blockchain security tools. Hackers often apply the following strategies:
a. Stealing private keys
Data recorded on the blockchain is highly guarded, but an end-user still needs a private key to access the network. Once a hacker manages to steal this key, he/she practically becomes the owner of the user data and can steal all the user’s information.
b. Software flaws
Blockchain protocols like Ethereum or Algo may be strongly secure, but the apps built on them may have bugs in their codes, which the hackers take advantage of. One example is the 2016 DAO assault, in which an intruder stole approximately $60 million and almost brought the entire Ethereum network down.
Many times, users fall victim to malware for getting into a tempting website or opening an email or message designed for a phishing attack. Cybercriminals often don’t stick to just one type of malware, there is a broad range they choose from. One of the deadly ones is called crypto-jacking where a computer’s resources for mining cryptocurrencies are taken over. This malware degrades the computer’s performance, consumes more energy, and allows third-party malicious codes to infiltrate the system.
5. Not enough data for full-scale application
As blockchain applications become more popular, the networks get bigger. Even though in theory, the technology is scalable and safe at a massive scale, the original concept of them was not intended for widespread adoption and usage. Therefore, in the majority of cases, this gives rise to the “Blockchain Trilemma”, meaning on a singular blockchain platform, it is challenging to achieve all three by equal amounts – pure decentralisation, scalability, and the layered protection that blockchain promises.
Moreover, there is always the possibility of performance degradation with any technology and as of yet, there is not enough data to conclusively determine the strength of blockchain security on a huge scale. According to experts, it is highly possible that as the technology’s ecosystem expands, additional blockchain security vulnerabilities may be found and exploited, or that the technology infrastructure that maintains blockchain may become more susceptible to basic errors.
6. Vendor risks:
Integration of blockchain technology into a non-blockchain organization’s infrastructure is becoming more common as distributed ledger technology becomes more mainstream. Many businesses depend on third-party vendors for this, making the security of their own systems inextricably linked to the security of the vendors.
Unfortunately, quite often vendors have poor blockchain security tools, incompetent staff, or are themselves the victims of blockchain security vulnerabilities, which endangers the establishment that hires them. When vendors use smart contracts, which govern the entire activity of the company, the chances of this turning into a bigger problem increases.
How can you solve blockchain security vulnerabilities?
Blockchain is, to date, the most reliable technology anyone can use, and the more it will grow, the more benefits will be seen by the world. Therefore, heavy research has been conducted in the area, and a few potent resolutions have also been proposed to all the blockchain security issues, some of which have been effectively applied as well –
1. Preventing 51% attack:
As this kind of attack is one of the most dangerous ones on a blockchain network, yet one of the most common ones, there has been a lot of research done in this area and many solutions have been proposed. Some of these have been practically applied successfully:
- As mentioned above, using a PoS consensus instead of the traditional PoW one is one of the successful solutions.
- Another resolution proposed to prevent such an attack on blockchain in Australia was to keep the mining pools as small as possible so that it makes sense for individual miners to earn rewards, but doesn’t make sense to group themselves.
- Hackers often attack smaller-scale blockchains with much to lose as that’s where they expect to find the highest amount of blockchain security issues. As a future goal, nascent blockchains should concentrate on developing protocols with even more robust security features of blockchain and take the assistance of an experienced pair of eyes to look for flaws.
- If a network is using PoW consensus, according to a recent study, A 51% attack can be avoided by adding a so-called “delay feature” to the network’s proof-of-work consensus algorithm, which penalises miners who might be planning an attack. Since for this attack, a miner has to secretly create blocks before posting them on the blockchain, a delay feature allows for penalties that make such attacks exorbitantly costly, thus discouraging such attacks.
2. The use of a Proof-of-Stake mechanism
To address the problems with PoW, a new principle called Proof-of-Stake (PoS) was introduced, in which the network member with the greatest number of currencies gains decision-making power. Here the idea of “miners,” who solve a complicated mathematical problem to determine if a new block should be added, is replaced by “validators,” who stake their money on the blocks they believe are legitimate. The stake value determines whether or not this individual has the right to verify a block of transactions.
The PoS mechanism itself makes the transactions much faster and scalable without succumbing to too many computational or economical costs. Furthermore, here while inserting a new block, each committee member sends only one fast and easily computable message and therefore the chances of attack in between are less. However, since the number of such rounds required to attain the consensus is more, the participant can be attacked by a hacker after one round. To settle this, in some protocols, the committee members are changed after each such round. Thus it becomes almost impossible for an adversary to reach members to manipulate the votes and the system remains secure from attacks on individual miners like 51% attack.
3. Choosing a reputed vendor
A detailed background check on the vendors is critical prior to using their applications to overcome issues with their blockchain security tools. The most important factors are a proven and diverse expertise and the reputation of the company in the field of blockchain in Australia, or at the very least, the experience of their application developers. Fortunately, there exist many such blockchain consultants who are highly reputed and internationally recognised.
4. Staying alert
Because of the powerful security features of blockchain in Australia, many end-users forget to pay attention to the other areas which can allow thieves to get into the system. It is important for blockchain app users to stay vigilant and abide by the precautions that we already know to follow against regular malware, such as, running virus scans regularly with a reputed antivirus program, storing private keys with sturdy encryption, never sharing one’s login credentials and private keys with anyone, etc.
As blockchain-based applications see a rise in the world, product designers must consider security to be the most important aspect. Every step in the product development cycle, from design to development, is critical to ensuring that products are safe, dependable, and secure for consumer use. As for the user, before one starts to use the technology, it is always advisable to seek advice from a highly reputed and experienced professional working in the area of blockchain in Australia, specifically, blockchain security. Not only can expert consultants protect you from making poor decisions, but they can also provide you with insight and advice about how to make better use of technology.