Where blockchain security

Basic BlockChain Security

Blockchain Technology produces a structure of data with inherent security qualities. It's based on principles of cryptography, decentralization and consensus, which ensure trust in transactions. In most blockchains or distributed ledger technologies (DLT), the data is structured into blocks and each block contains a transaction or bundle of transactions. Each new block connects to all the blocks before it in a cryptographic chain in such a way that it's nearly impossible to tamper with. All transactions within the blocks are validated and agreed upon by a consensus mechanism, ensuring that each transaction is true and correct.

Blockchain technology enables decentralization through the participation of members across a distributed network. There is no single point of failure, and a single user cannot change the record of transactions. However, blockchain technologies differ in some critical security aspects

How security differs by blockchain types

Blockchain networks can differ in who can participate and who has access to the data. Networks are typically labeled as either public or private, which describes who is allowed to participate, and permissioned or permissionless, which describes how participants gain access to the network.

Public and private blockchains

Public blockchain networks typically allow anyone to join and for participants to remain anonymous. A public blockchain uses internet-connected computers to validate transactions and achieve consensus. Bitcoin is probably the most well-known example of a public blockchain, and it achieves consensus through "bitcoin mining." Computers on the bitcoin network, or “miners,” try to solve a complex cryptographic problem to create proof of work and thereby validate the transaction. Outside public keys, there are few identity and access controls in this type of network.

Private blockchains use identity to confirm membership and access privileges, and typically only permit known organizations to join. Together, the organizations form a private, members-only "business network." A private blockchain in a permissioned network achieves consensus through a process called "selective endorsement," where known users verify the transactions. Only members with special access and permissions can maintain the transaction ledger. This network type requires more identity and access controls.

Public blockchains are public, and anyone can join them and validate transactions.

Private blockchains are restricted and usually limited to business networks. A single entity, or consortium, controls membership.

Permission less blockchains have no restrictions on processors.

Permissioned blockchains are limited to a select set of users who are granted identities using certificates.

Cyberattacks and fraud

While blockchain technology produces a tamper-proof ledger of transactions, blockchain networks are not immune to cyberattacks and fraud. Those with ill intent can manipulate known vulnerabilities in blockchain infrastructure and have succeeded in various hacks and frauds over the years. Here are a few examples:

How Fraudsters Attack Blockchain technology

Hackers and fraudsters threaten blockchains in four primary ways: phishing, routing, Sybil and 51% attacks.

Phishing attacks

Phishing is a scamming attempt to attain a user's credentials. Fraudsters send wallet key owners emails designed to look as though they're coming from a legitimate source. The emails ask users for their credentials using fake hyperlinks. Having access to a user's credentials and other sensitive information can result in losses for the user and the blockchain network.

Sybil attacks

In a Sybil attack, hackers create and use many false network identities to flood the network and crash the system. Sybil refers to a famous book character diagnosed with a multiple identity disorder.

51% attacks

Mining requires a vast amount of computing power, especially for large-scale public blockchains. But if a miner, or a group of miners, could rally enough resources, they could attain more than 50% of a blockchain network's mining power. Having more than 50% of the power means having control over the ledger and the ability to manipulate it.

Blockchain security for the enterprise

When building an enterprise blockchain application, it’s important to consider security at all layers of the technology stack, and how to manage governance and permissions for the network. A comprehensive security strategy for an enterprise blockchain solution includes using traditional security controls and technology-unique controls. Some security controls specific to enterprise blockchain solutions include:

Identity and access management
Key management
Data privacy
Secure communication
Smart contract security
Transaction endorsement

Blockchain security tips and best practices

When designing a blockchain solution, consider these key questions:

What is the governance model for participating organizations or members?
What data will be captured in each block?
What are the relevant regulatory requirements, and how can they be met?
How are the details of identity managed? Are block payloads encrypted? How are the keys managed and revoked?
What is the disaster recovery plan for the blockchain participants?
What is the minimal security posture for blockchain clients for participation?
What is the logic for resolving blockchain block collisions?

To implement a blockchain solution security model, administrators must develop a risk model that can address all business, governance, technology and process risks. Next, they must evaluate the threats to the blockchain solution and create a threat model. Then, administrators must define the security controls that mitigate the risks and threats based on the following three categories:

Enforce security controls that are unique to blockchain
Apply conventional security controls
Enforce business controls for blockchain