Blockchain security is the risk management procedure or security system that is put in place to protect a blockchain network from online threat actors. Blockchain security uses a combination of cybersecurity best practices, tested frameworks and technical assurances to protect against fraud and cyberattacks.
Since the advent of Bitcoin, blockchain technology has fast become a new kind of normal in today’s societies. Known, originally, for its role in cryptocurrency circles as the distributed ledger technology that allowed decentralized trade and verification (without an institutional 3rd party, so to speak), today, there are numerous different blockchain networks supporting various currencies and digital services around the world. From banking and healthcare to supply chains and traceability, blockchains play an increasingly integral role in our daily lives.
As a consequence, it’s becoming equally important to understand what kinds of blockchains are out there and, most importantly, how they are secured. That’s why we’ve written this guide to the blockchain and its security. Read on to discover what it is, the different types that exist today, how secure they are, what cybersecurity protocols should be considered when engaging with a blockchain, and what attacks are common to blockchain networks.
Blockchain Definition
In essence, a blockchain can be defined as a distributed database (known as a ledger) that is shared between different computer users. The data in a blockchain is structured into blocks, connected together by a cryptographic chain. When a transaction or bundle of transactions (in the form of a new data block) is added to the blockchain, the block is then validated and agreed upon by a consensus mechanism (sometimes known as a PoW or proof of work). The consensus mechanism involves the collective participation of some of the members (known as nodes) across the distributed network. In Bitcoin (and other cryptocurrencies) this is done through the process of “mining” and “hashing”, which involves significant computing power. As a result of the above, distributed ledger technologies (DLTs) cannot be changed by a single person on the network. Thus, there is no single point of failure and any risk is distributed.
Now you understand the blockchain, let’s examine the different types of blockchain that are out there.
Types of Blockchains
Blockchains differ primarily in who can and can’t participate and access the data in their networks. Largely speaking there are two main types of blockchains:
Public Blockchains
Public blockchain networks (sometimes known as an open or permissionless blockchain network) are open to anyone to join, with all of the members (who usually remain anonymous) being able to validate transactions if they choose to. Public blockchains validate transactions via public keys, using computers that are connected to the internet. These public cryptographic keys are the primary way of identifying and accessing data on this type of network.
Private Blockchains
Private blockchains require membership and identifying information to access the network’s data. For this reason, private blockchains are known as permissioned blockchain networks and they achieve consensus through a mechanism known as selective endorsement (where only certain members of the network are permitted to verify transactions from within, often using special permissions to access the network’s distributed ledger to do this). Often, private blockchain networks consist of known and trusted entities and organizations.
Hybrid Blockchain
In essence, a hybrid blockchain is a mix of private and public blockchains that are interoperable. They are designed to leverage the advantages of the two main types of blockchains that are used today.
How Secure is Blockchain?
By virtue of its decentralized design and use of cryptography, blockchains are, in general, fairly secure. Once a block of data has been added to the chain and verified, it cannot be removed, and multiple blocks are always stored linearly (so it’s easy to check the ledger for systematic problems). Equally, the records stored in most blockchains are encrypted, so sensitive data is often difficult to access even when hacked. However, blockchain networks are more complicated. Despite the ledger technology itself being theoretically “impenetrable”, the network itself is not immune to cyberattacks and attempted fraud. Since their inception, there have been a number of different attacks on various blockchain networks.
Blockchain Attacks
Broadly speaking, there are four main types of cyberattack that blockchain networks are vulnerable to:
51% Attacks
A particularly processing-intensive and power-intensive cyberattack, a 51% attack is instigated by a group of “miners” (originally part of the network) who leverage their combined resources to control enough of the network’s mining power (more specifically, the network’s mining hash rate). In doing so, they effectively gain control of the ledger itself. Once they have control of the ledger, the rogue miners can manipulate the transactions on it to enact financial fraud. Private networks are not usually susceptible to this type of attack.
Routing Attacks
A routing attack is very hard to spot because most of the attack happens behind the scenes. This attack involves intercepting data being transferred to your internet service provider, dividing the network, and targeting a certain chain between certain nodes. Essentially having created a kind of parallel chain, the attacker can then steal any currency or personal information from their targeted area.
Sybil Attacks
A Sybil attack involves a hacker using a node to create multiple fake identities or ‘Sybil identities’ to flood a network. This then allows them to carry out a 51% attack, see above, where they gain a 51% majority control of the network’s computing power: thereby giving the hacker a disproportionately large influence or presence in the network. Common in distributed systems, it undermines trust and integrity, prompting defense through identity verification and cryptographic protocols.
Phishing Attacks
A classic online scamming technique that many users should be well-acquainted with, phishing attacks on a blockchain network are not necessarily an attack on the network in the same way that the last 3 examples are. A blockchain phishing attack targets the members of the blockchain with phishing emails to attain their credentials, with the intention of stealing currency from their accounts.
As can be seen from the variety of threats above, cybersecurity best practices play an important role in blockchain security today.
Blockchain and Cybersecurity
The role of cybersecurity, or more precisely, data security in blockchain networks is integral to today’s publicly (and privately) used distributed ledger technologies. Below, we’ve combined a list of best practices and frameworks that both enterprises and network administrators can use to enhance their blockchain security moving forward.
- Identity and Access Management: For both public and private networks, access controls and legitimatizing communication between users and nodes are integral to the internal protection of sensitive data transfers and currency. This includes deciding whether block payloads are encrypted or not and how users’ private and public keys are managed and revoked.
- Governance and Risk Management: Consider what your disaster recovery plan for the blockchain participants is, if the worst should happen. Perform regular risk assessments to discover important vulnerabilities or other weaknesses in your chain. Equally, remember that blockchains are subject to all cybersecurity and privacy laws, regulations, and other nation-specific requirements throughout their lifecycle.
- Use a proven VPN : Recommend that users and nodes activate a trusted and proven VPN when making transactions. A Virtual Private Network works by creating an encrypted private tunnel between a user’s remote computer and any external servers, so your data or transactions will remain protected from any outside threats to the network.
- Choose a Dedicated Antivirus Software: Overall, known threats to blockchain networks, particularly phishing scams, are much easier to avoid if you have a dedicated antivirus software installed on your local machine. A good antivirus system will not only defend you from known threats but will also run regular scans to warn you of any new ones. Equally, antivirus software provides you with an extra layer of protection when you’re validating transactions as a node. We recommend using our dedicated security software Kaspersky Premium, which offers regular updates, scans, and consistent help and support with all your digital activity.
FAQs
What is Blockchain Security?
Blockchain security is the risk management procedure or system that is designed to protect a blockchain network from online threat actors and cybercriminals. Blockchain security uses a combination of cybersecurity best practices, tested frameworks and technical assurances to protect against fraud and cyberattacks (including 51%, Sybil, Phishing and Routing attacks).
Why is Blockchain Security Needed?
Despite the fact that blockchains are cryptographically signed,
blockchain security is needed to ensure that only authorized users gain
access to nodes and the blockchain network overall. Blockchain networks
take advantage of a number of cybersecurity protocols and frameworks to
ensure sensitive user information is kept secure and hidden.
Is Blockchain Security the same as Cybersecurity?
Blockchain security is designed specifically to protect a
blockchain network from infiltration and attacks from cybercriminals and
threat agents. Equally, blockchains use their inherent security
protocols to provide transparency and immutability. Cybersecurity is
generally concerned with the overall protection of data on any system,
network, or machine, including blockchains.
Is Blockchain Safe?
Yes, blockchains are safe because they are designed to be both transparent and immutable via consensus mechanisms and cryptographic keys. However, blockchain networks and the members of the blockchain, including nodes, are vulnerable to certain types of cyberattacks. The most common attack vectors are 51%, Routing, Phishing scams, and Sybil attacks.
How Secure is Blockchain?
Blockchains are very secure by design: their data is structured into blocks, connected together by a cryptographic chain, and they leverage a consensus mechanism (involving the collective participation of some of its members) to transfer information. However, blockchain networks are less secure because there are an increased number of vulnerabilities to exploit.
What is a 51% Attack?
A 51% attack is a specific type of cybercriminal activity relative to blockchains and distributed ledger technologies. 51% attacks involve a group of rogue miners on the network combining resources to take control of the blockchain’s ledger and perform fraudulent transactions. Private blockchains are not susceptible to this type of attack.
What is a Routing Attack?
A routing attack involves intercepting data being transferred to an internet service provider, essentially dividing the blockchain network, and targeting a certain chain between certain nodes. From there, the attacker can steal any currency or personal information. Routing attacks are hard to spot because the attack itself happens behind the scenes.
What is a Hybrid Blockchain?
A hybrid blockchain is a combination of aspects from private and public blockchains that leverages their collective advantages. Equally, hybrid blockchains can also refer to a blockchain consisting of both a private and public blockchain that are interoperable. Although upgrading can be difficult, they are considered easier to scale.
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- 5 Considerations for Hybrid Cloud Security
- What is Bitcoin?
- Common Cryptocurrency Scams and How to Avoid Them?
- What is Cryptocurrency and How Does It Work?
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