Security of blockchain technology
First used in Bitcoin, security of blockchain technology has quickly become commonplace in today’s society. It was initially known in cryptocurrency circles as a distributed ledger technology used to decentralize trade and verify transactions without the need for an “institutional” third party. Today, many different blockchain networks support different currencies and digital services around the world. Blockchain is increasingly embedded in our everyday lives, from banking and healthcare to supply chains and product tracking.
Therefore, it is important to know what types of blockchain technology there are and, most importantly, how their security is ensured. In this article, we will talk about blockchain and how to protect it. You will learn what blockchain is, what types of blockchain exist, how secure they are, what cybersecurity protocols should be used when working with blockchain, and what attacks blockchain networks are most often subjected to.
Blockchain technology definition
In essence, a blockchain is a distributed database (also called a ledger) that is shared between different users of computer devices. The data in the blockchain is structured into individual blocks linked together by a cryptographic chain. When a transaction or group of transactions (in the form of a new block of data) is added to the blockchain, that block is verified and confirmed through a consensus mechanism (sometimes called proof of work, PoW).
The consensus mechanism requires the collective participation of a number of members of the distributed network, called “nodes”. In the Bitcoin system (and other cryptocurrency systems), this is done through the processes of mining and hashing, which requires serious computing power. All of the above means that the distributed ledger of data cannot be changed by any one user of the network. Thus, there is no single point of failure in the blockchain, and all risks in it are distributed.
We have found out how the blockchain works in general, now let’s look at its individual types.
Types of Blockchain technology
Blockchain networks differ primarily in who can and cannot participate in them and gain access to the data they contain. Broadly speaking, there are two main types of blockchain.
Public blockchain technology
Anyone can join a public blockchain (sometimes called an open or permissionless blockchain). Any participant can confirm transactions on such a network if they wish, and they typically remain anonymous. In a public blockchain, transactions are confirmed by public keys using computers connected to the internet. These public encryption keys are the primary way to identify and access data on these types of networks.
Private Blockchain technology
Access to data stored in a private blockchain requires membership and identification information. For this reason, a private blockchain is also called a permissioned blockchain. Consensus in such networks is achieved through a mechanism called selective endorsement, where only certain participants are allowed to approve transactions within the network, and they often require special permission to access the distributed ledger to do so. Members of private blockchain networks are typically well-known and reputable institutions and organizations.
Hybrid Blockchain technology
Hybrid blockchain combines private and public blockchains that interact with each other. This allows for the benefits of both types of blockchain that exist today.
Is the blockchain technology well secured?
Thanks to its decentralized structure and use of encryption, blockchain is generally quite secure. Once a block of data is added to the chain and confirmed, it can no longer be deleted, and groups of blocks are always stored in a linear fashion (so the ledger can be easily checked for systemic problems). Additionally, records in most blockchains are stored encrypted, so even if hacked, it can be difficult to access sensitive data. Blockchain networks, however, are much more complex. While the ledger technology itself is theoretically impenetrable, blockchain networks are not immune to cyberattacks and fraud attempts. Since the inception of blockchain networks, many have been subject to various attacks.
Attacks on blockchain networks
Broadly speaking, there are four main types of cyber attacks that blockchain networks are vulnerable to.
Attack 51%
A 51% attack is a particularly resource- and energy-intensive type of cyberattack, where a group of miners within a network pool their resources to seize control of the network’s mining power (or more accurately, its hashrate). As a result, they effectively gain control of the ledger itself. By gaining control of the ledger, attackers can influence how transactions are carried out, allowing them to commit financial fraud. Private networks are usually not susceptible to this type of attack.
Routing attack
Routing attacks are very difficult to detect because most of these attacks are silent. In an attack, attackers intercept data sent to an ISP, split the network into parts, and attack a specific chain between specific nodes. They essentially create a parallel chain, and then steal any currency or private information from the attack area.
Attack of the Sibyl
A Sybil attack is a type of attack where a hacker uses a node to create multiple fake identities (called Sybil identities) and floods the network with them. This allows them to perform the aforementioned 51% attack, which results in them controlling a majority (51%) of the computing power, giving them a disproportionately large presence or influence within the network. Distributed systems are often subject to such attacks, which undermine their integrity and the trust between participants, requiring the introduction of protective measures such as identifying participants and using encryption protocols.
Phishing attacks
This is a classic type of online fraud that should be familiar to many internet users. But in the case of blockchain, phishing attacks are not necessarily attacks on the network in the same sense as the three previous types of attacks. Blockchain phishing attacks target participants in the blockchain network, using phishing emails to trick them into giving up their credentials in order to steal currency from their accounts.
Given the variety of threats, it is important to use advanced cybersecurity techniques to ensure blockchain security.
Blockchain technology and Cybersecurity
Today, cybersecurity, or more precisely data protection, plays a very important role when working with distributed ledger technologies in public and private networks. Below we provide a list of best practices and solutions that business leaders and network administrators can use to safely develop their blockchain projects.
- Identity and access management. Access control and ensuring secure communication between users and nodes is an integral part of the internal protection of sensitive data and currency in public and private networks. This includes decisions on whether or not to encrypt the data contained in blocks and how to manage and revoke users’ public and private keys.
- Compliance and risk management. Consider a disaster recovery plan for your blockchain participants in case of a worst-case scenario. Conduct regular risk assessments to identify serious vulnerabilities and other weak links in your chain. Remember that throughout the lifecycle of your blockchain, it is subject to all cybersecurity and privacy laws, regulations, and requirements in your country.
- Reliable VPN. Recommend that users and nodes on your network connect to a reliable and trusted VPN connection when making transactions. A VPN connection creates a separate encrypted tunnel between the user’s remote computer and any external servers, so that data and transactions within this connection are protected from all external threats.
- Dedicated antivirus software. You can avoid most known threats to blockchain networks, especially phishing attacks, if you have dedicated antivirus software installed on your computer. A quality antivirus solution will not only protect you from known threats, it will also perform regular scans to warn you about new threats. In addition, if you confirm transactions as a node, antivirus software will provide you with an additional layer of protection. We recommend installing a dedicated security solution, Kaspersky Premium , which includes regular scans, constant database updates, technical support, and assistance with any issues related to your digital activities.
Frequently asked questions
What is blockchain security?
Blockchain security is a risk management procedure or security system that is designed to protect a blockchain network from online threats and cybercriminals. Blockchain security combines advanced cybersecurity techniques, proven solutions, and technical controls to prevent fraudulent activities and cyberattacks, including 51% attacks, Sybil attacks, routing attacks, and phishing attacks.
Why is blockchain security needed?
Although the blockchain is secured using cryptographic signatures, additional security is needed to ensure that only authorized users have access to the nodes and the blockchain network as a whole. To protect and securely hide users’ personal data, blockchain networks use a number of cybersecurity protocols and platforms.
Is there a difference between blockchain security and cyber security?
Blockchain security is designed specifically to prevent cybercriminals from penetrating the blockchain network. In addition, the blockchain uses built-in security protocols to ensure transparency and immutability of data. The concept of cybersecurity refers to the general protection of data in any system, network or computer, including blockchains.
Is blockchain technology secure?
Yes, blockchain is secure because the technology is specifically designed to be both transparent and immutable, which is achieved through consensus mechanisms and the use of encryption keys. The most common of these are 51% attacks, Sybil attacks, routing attacks, and phishing attacks.
Is the blockchain technology well secured?
Blockchain is inherently well protected: data in the blockchain is structured into blocks linked together by a cryptographic chain, and a consensus mechanism is used to transmit information, which requires the collective participation of a certain number of network members. However, blockchain networks are less secure because they contain more vulnerabilities that can be exploited by attackers.
What is a 51% attack?
A 51% attack is a specific type of criminal cyber activity that targets blockchain networks and distributed ledger technology. During an attack, a group of malicious miners within a network pool their resources to gain control of the ledger in order to conduct fraudulent transactions. Private networks are not susceptible to this type of attack.
What is a routing attack?
In a routing attack, attackers intercept data sent to an ISP, essentially splitting the blockchain network into pieces and attacking a specific chain between specific nodes. From there, they can steal any personal data or currency. A routing attack is very difficult to detect because it happens silently.
What is hybrid blockchain technology?
A hybrid blockchain combines the features of a private and public blockchain, allowing it to leverage the benefits of both. This term is often used to describe a blockchain that consists of a private and public blockchain that interact with each other. Such a blockchain can be difficult to upgrade, but is considered easier to scale.
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