Blockchain Security: A Brief Overview

Cybersecurity Trends

While developing a cybersecurity strategy is critical for any business, the distributed nature of the blockchain introduces some interesting new challenges.
As blockchain systems continue to attract more attention from hackers, it's important to have a tailored structure in place to prevent and respond to any potential security incidents. Here are 6 steps to boosting your blockchain security:

1. Governance

Due to the decentralization of the public blockchain, a core responsibility of the governing body will be to ensure that individual nodes that seek to join the network are being properly vetted. Moreover, from a security standpoint, the core code along with any security patches must be regularly reviewed and updated. When developing the security governance model, it's important to consider the consensus mechanism and blockchain type (private vs public). Most blockchain-based systems are run by either a consortium, joint venture, or statutory organization.

2. Third Party Risk Management

Third party risks have been a particularly stubborn issue for many blockchain technologies. For example, one of the largest breaches in recent years, the $615 million dollar Ronin hack, was due to a third-party validator node run by a decentralized autonomous organization (DAO). Third party risks management and due diligence must therefore play a major role in any blockchain security policy. Security tools like Quantum Armor can help validate external services before being incorporated into the system or organization.

3. Application Security

We've covered the major blockchain application security issues in a previous post, but here is a roundup of some key concerns:

  • Gas efficiency
    Blockchain developers have shown a tendency to underestimate the quantity of gas that their code generates. Once in production, gas limits can easily be exceeded, leading to system outages and poor overall performance.

  • Contract vulnerabilities
    Logical flaws within smart contracts can lead to systemic manipulation when users misunderstand the terms or malicious actors take advantage of unintentional loopholes. A properly audited smart contract will protect users from external threats as well as prevent most non-malicious exploitations.

  • Frontrunning
    Frontrunning occurs when malicious actors detect pending blockchain transactions and then 'hijack' the trade by simply paying a higher fee. Frontrunning is easy to automate and has become a very common issue among DeFi applications.

4. Data Security

When it comes to blockchain data, there are two main approaches. Some prefer to keep everything on-chain (i.e. visible to all participants) while others store a significant portion of the data off-chain (i.e. in local storage, with just a hash uploaded to the chain). While on-chain storage is far more secure, there will be a trade off in terms of data confidentiality. With that being said, new approaches are being developed to allow on-chain data to remain encrypted throughout the transaction (zk-SNARKs is an early example), as well as to limit the data visibility to only the related parties.

5. Transactions

Each consensus algorithm and its underlying protocol will offer varying degrees of network speed, efficiency, scalability, and security. Here are a few of the more popular protocols:

  • Hyperledger
    An open-source framework developed by Linux to help guide universal principles for blockchain implementation. Hyperledger has a large quantity of tools and libraries, and is particularly helpful for international transactions.

  • Quorum
    Developed by JP Morgan, Quorum is another open-source framework that focuses on financial use cases. It provides increased performance but is less secure than some alternatives.

  • Corda
    Corda, developed by R3, excels in security, stability, and scalability. However, it suffers from a lack of flexibility, as only direct parties can take part in transaction decisions.

  • Enterprise Ethereum
    As opposed to the public Ethereum, Enterprise Ethereum is used by private blockchains and has proven to be highly scalable. Unfortunately, it can be prone to online hacking and has high transaction fees.

6. Infrastructure Security

Like all digital products, blockchain applications require basic security measures to ensure that the application, infrastructure, and network are safe and secure. If even a single node or API is compromised, users will be at risk of token theft, impersonation, or account tampering. Fundamental security components include endpoint security, vulnerability management, attack surface monitoring, and periodic penetration testing. Regular security training workshops should be held to ensure that developers, management, and support teams all possess a shared, effective, and up-to-date approach to cybersecurity. Contracting with an outside security partner to review your source code and provide objective third-party guidance is highly recommended.

Similar Reads:
Top Five Blockchain Breaches of 2022
Does Crypto Need a Cybersecurity Refresh?
How the Dark Web Can Protect Your Company

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