To understand Blockchain security best practices, you must understand Blockchain. It is based on principles of cryptography, decentralization and consensus, which ensure trust in transactions. In layman terms, a Blockchain is literally a chain of blocks in which 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 is designed to enable 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 without validation. However, blockchain technologies differ in some critical security aspects.
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 is an example.
Distributed Ledger Technology (DLT), the formal name for Blockchain, is open to the public, so every user can use it. Before being permanently stored in the blocks, the data goes through strong encryption algorithms. The data is structured into blocks and each block contains a transaction or bundle of transactions. After a block has been stored, it is almost impossible to alter any data in it, since each block in a blockchain has a unique identification or fingerprint known as a “hash.”
These unique fingerprints are made while the block is created. In addition to its own hash, the block holds the hashes of the following block and the previous block to form a chain. If the data inside the block changes, it also causes the hash of the block to change as well. Hence, changing a block’s content changes the whole block, and it doesn’t remain the same block anymore. In the event any unauthorized person tries to tamper with any block, it can no longer be linked to the following block, since every block contains the address of the block prior to it.
Now, you might be thinking, what if an attacker changes the contents of one block and recalculates all the hashes of the following blocks, essentially making the Blockchain valid again? To counter this flaw, Blockchain offers a feature called “proof-of-work.” This feature slows down the time for the creation of the new block, making it difficult to change the contents of the block. Now, if an attacker attempts to recalculate the hashes of the following blocks, he will also need to recalculate proof-of-work for each one of them. The story doesn’t end here. The Blockchain works on distributed architecture instead of a centralized one. The public users are allowed to join a Peer-to-Peer (P-2-P) network. Anyone who joins this network gets a full copy of the entire Blockchain. All these copies are verified to maintain the integrity of the contents of the Blockchain. Every time a new block is added to the Blockchain, it is sent to all the users in the network to be verified. Once the new block has been verified, it is added to the Blockchain of all the users in the network. Using this method, the whole network can verify and approve each block before it becomes part of the chain. So, now to successfully change the contents of a single block, the attacker will need to:
Basically, the attacker must own no less than 51 percent of the network in order to alter a single block within the entire blockchain. Seems pretty impossible? Not so fast.
There is nothing perfect and fool-proof in this world. Despite these layers of security, there are still chances for vulnerabilities. Here are some ways that can be used to compromise Blockchain Technology:-
The endpoints exist outside of the Blockchain, where users interact with the Blockchain to get or send data. You can make the entire Blockchain technology fool-proof, but what if a legitimate user tries to access it using poor security practices? Since it becomes more challenging to generate authentic user keys, attackers tend to target users who employ poor security measures. The endpoint is the point to steal the keys and gain private access to the Blockchain and Wallets.
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. Note: Private Blockchains are not vulnerable to 51% attacks.
Blockchain uses a lot of network bandwidth both incoming and outgoing, particularly on the router, and all of this in real-time. Your routing traffic can be targeted by an attacker to sniff important information such as the private key of the user. They can also simply sit and spy on your network traffic, or they can even intercept the traffic to launch an attack.
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.
Blockchains rely on real-time, large data transfers. Hackers can intercept data as it’s transferring across the internet service providers. In a routing attack, blockchain participants typically can’t see the threat, so everything looks normal. However, behind the scenes, fraudsters have extracted confidential data.
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.
When using blockchain as a distributed ledger, some adjustments need to be made when dealing with enterprise solutions. You have to achieve maximum security but at the same time, you also have to follow the business rules of that particular enterprise. To make a secure and comprehensive enterprise blockchain solution, technology controls, unique controls, as well as traditional security controls, are required. Here are few security controls to consider for enterprise blockchain solutions.
The activities of the employees in the organization must be tracked, and access should be granted only based on the employees roles in the organization.
Smart Contract is a program that resides in the blockchain and gets executed when some predetermined conditions are met. In other words, it’s a convenient way to approve a transaction. But every convenience has its setbacks so you have to be careful while deciding those “predetermined conditions.” Accountability, Ownership, Responsibilities and segregation of duties relating to managing “predetermined conditions.”
No matter how much you work on the improvement of the security of the Blockchain and security best practices, it will mean nothing if you cannot handle and manage the security keys properly in your organization. Establish Key Management Policies and Procedures.
By taking a few precautions, you can enhance the built-in security capabilities of Blockchain. Here are few security best practices that you can follow.
Two-Factor Authentication requires something “that the user has in his possession” along with the traditional password. By enabling 2FA on the Blockchain, the user will have to enter the key and a one-time generated password (aka OTP). This way, even if an attacker gets your key, they will be unable to access your Blockchain until they have access to your OTP.
Because Blockchain is always connected to the internet, it needs to have a strong security network also. Use firewalls to block any suspicious network traffic and implement Advanced Threat Protection, Intrusion Detection and Prevention solutions.
Phishing techniques are most common and can be highly effective if they become successful. The attacker can grab pretty much any sensitive information by tricking the user into clicking on a malicious link. Professional anti-phishing software can detect and notify you if there are suspicious emails on your server with questionable links to fake websites. You can quickly identify the sender and avoid a potential breach.
Although Blockchain promises one of the best security options to store sensitive information, yet it is not a perfect solution, and it also has some vulnerabilities to be aware of. But with a little effort, you can overcome these setbacks of Blockchain by following the given security best practices.
For more Blockchain Security Best Practices, contact IRM Consulting & Advisory for more information.