Cyber attacks have increased in frequency and severity, prompting everyone to question "the security of this new IT advancement?". Blockchain was initially created to support Bitcoin; since its conception, however, it has gained increased traction beyond just cryptocurrency use cases. With increased awareness comes questions regarding its safety and integrity. Today we will examine blockchain security and its function, specifically some current examples of existing blockchain protection measures.
What is Blockchain Security?
Remind yourselves what blockchain is. Blockchain is a distributed ledger (DLT) designed to promote organizational trust. A copy has been duplicated across different computer systems so all members (nodes) of that particular chain can view, record and share encrypted transactions.
Blockchain technology organizes data in "blocks", or groups of information. Each block holds specific amounts before being linked with previous full blocks to form a data chain. Blockchain security is an integrated risk management solution that incorporates assurance services, cybersecurity frameworks and best practices into an overall approach to decrease cyber attacks and fraud risks.
Blockchain data structures possess inherent security features due to their combination of consensus, cryptography and decentralization. Since each new block connects directly to previous blocks, it becomes virtually impossible for an alteration to occur between blocks. A consensus mechanism of authorized users who validate all transactions within a block ensures that transactions are accurate and true - this guarantees there's no single point of failure. In contrast, users cannot alter transaction records.
Blockchain security goes far beyond its intrinsic features. Here's why.
What are the Types of Blockchain?
Before discussing how Blockchains operate, it is necessary to discuss their security. Each type presents unique obstacles.
Private Blockchains
Invites are required in private blockchain networks; users must be authenticated through validation by either an administrator, starter or central administrator. Business owners typically set up permissioned blockchains that limit who can participate and what transactions can occur. Participants require either an invitation to join or permission in any event.
Private blockchains typically rely on a proof-of-authority consensus method. They're frequently employed for access, authentication and record-keeping tasks in secure business environments - often; the transaction data remains private.
Blockchains for Public Use
Participation and transparency are at the core of public blockchains, where consensus for transactions is decentralized so anyone can validate network transactions. Software codes such as Bitcoin and Ethereum are both open source, making their software easily accessible to members of the public.
Public blockchains' primary characteristic is decentralization. This stems from crypto economics and helps ensure cooperation across a network. Public blockchains do not contain central controls or authorities and don't create single points of failure in design either.
Decentralizing a blockchain depends on many variables, including its algorithm for consensus, network governance structure, ownership of "private keys", economic incentives and any "data mining" programs where users earn cryptocurrency by validating transactions; such rewards offer strong motivation to participate and validate transactions.
Governance considerations involve who will develop the software, who has access to consensus mechanisms and who may participate in collaborative governance. Public blockchain consensus mechanisms typically fall into Proof-of-Work (PoW) or Prove-of-Stake (PoS).
Public blockchains differ significantly because anyone can easily access and verify transactions.
Consortium Blockchains
When discussing blockchains generally, only public and private chains come up. But another choice: consortium blockchains are often forgotten: this alternative involves participants pre-approved by central authorities before participating in consensus on a blockchain network - known as semi-permissioned networks as it allows partially decentralized or distributed operations while still maintaining certain levels of control - although transaction data on consortium chains could remain private.
Consortium blockchains usually reach consensus using Proof-of-Work, Authority or Stake; other techniques exist, including delegated Proof-of-Stake.
Blocks of Security
As the name implies, blockchains are digital blocks containing records of transactions linked together into one chain. A hacker would require altering multiple blocks that connect it to alter any record in it - an action likely detectable unless using other evasive techniques to accomplish their aim. Although not designed solely as protection against hackers, blockchain offers additional layers of defense, making hacker attempts less likely.
Cryptography is used to protect the records of the blockchain. Participants have private keys associated with transactions they perform that serve as their digital signature; should any file change invalidate this signature immediately, peer networks will be informed to prevent further damage to both networks and their participants.
Hackers seeking to gain control over blockchains face difficulty as these decentralized and distributed peer-to-peer networks constantly update and maintain them synchronically, with no single point of failure and being altered by one machine simultaneously. Accessing all instances (at least 51 per cent) at once would take much computer power; there has been debate regarding smaller blockchain networks being vulnerable, but no conclusion has yet been drawn; in general, larger networks tend to be safer from being altered than smaller networks.
Blockchains provide some features which could prove valuable when it comes to safeguarding data security, but you need to remember all of their requirements and conditions when choosing this solution for business use.
Not all Blockchains are Created Equal
Assessing whether the technology you have selected meets the security level you require is vitally important. There are currently two kinds of blockchain: public and Private; each type can offer differing degrees of protection depending on circumstances; however, their security can also vary accordingly.
Public blockchain utilize computers connected to the public internet to verify transactions and package them into blocks before adding them to an online ledger, making participation available to anyone with internet access; private blockchains typically include only known organizations as members and form their network of members-only participants.
A public blockchain may not work for enterprises due to its impossibility with data storage and access privileges. In contrast, private ones rely upon identity verification processes and membership privileges, allowing their members to know better who they're dealing with on the network.
Validating transactions is another distinct difference between public and private blockchains. All network participants must agree that this version of a transaction is the one and true version, something known as consensus. Bitcoin's most famous public Blockchain, Bitcoin Miner, achieves consensus via mining - where computers within its network solve complex cryptographic puzzles to produce proof-of-work documents that require considerable computing power for validation.
Private blockchains are networks with permissions that use selective endorsing to reach consensus through "selective endorsing", where only verified transactions from known users verify transactions on behalf of everyone with permissions and access can manage the ledger. While this approach presents several challenges - threats from insiders, for instance - they can often be mitigated using high-security infrastructure solutions.
The Infrastructure of a Blockchain Network can only be as Safe as the System Itself
Your private blockchain requires selecting an optimal platform. While blockchains feature inherent security properties, malicious actors could exploit known vulnerabilities to control your infrastructure and manipulate its processes. Aim for an integrated security infrastructure that seamlessly fits with existing systems.
- Stop anyone, even administrators and root users, from accessing sensitive data.
- Refuse to allow unauthorized changes in data or software within the network.
- Use the best security measures to protect encryption keys so they cannot be stolen.
These capabilities will protect your network from both inside and external attacks. Blockchain Platform is the only enterprise-ready, fully integrated blockchain platform designed specifically to facilitate multi-institution networks quickly, from creation, governance and operations perspectives.
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Blockchain Security Challenges
Blockchains aren't perfect, and cybercriminals have found ways to exploit their vulnerabilities, using four distinct approaches to attack them.
- Attacks that use routing. The blockchain relies on massive data transfers that are performed in real-time. Hackers can intercept data as it is being sent to ISPs. Blockchain users are unaware of any problems.
- 51% attacks. Mining on large-scale, public blockchains requires a lot of computer power. A group of unreliable miners could seize control of the ledger by accumulating enough computing power to exceed 50%. However, private blockchains do not fall victim to 51% of attacks.
- Sybil attacks. Sybil's attacks are named after the book about multiple personality disorders. They flood a network target with false identities and crash the system.
- Phishing attacks. The classic hacker technique works on blockchains as well. Cybercriminals use phishing to trick wallet holders into giving up their passwords.
Six Blockchain Security Examples
Examples of companies' and organizations' methods for providing blockchain security.
Mobile Coin
Mobilecoin, the Californian cryptocurrency firm, is creating an accessible yet secure cryptocurrency that businesses that cannot afford the cost of independently implementing ledger security can utilize to manage ledger data securely. As it functions like a third-party vendor of transaction services while keeping data encrypted between both sides, its product can also work seamlessly with Facebook Messenger and WhatsApp messaging applications.
Coinbase
Coinbase Exchange in California offers another cryptocurrency-related business platform, offering customers a place to buy and sell digital currencies using encryption technology while keeping passwords and wallets within a secured database. Coinbase employees must undergo extensive background checks as an added layer of protection against the theft of cryptocurrency funds.
J.P. Morgan
J.P. Morgan is one of the United States' premier financial institutions. They developed Quorum - their version of Ethereum for enterprise - which uses blockchain technology for private transactions, providing transparent yet cryptographically secure smart contracts transactions in their Quorum Network.
Lockheed Martin
Lockheed Martin became the first US defense contractor of its type to embrace blockchain technology, working alongside cybersecurity firm Guardtime Federal on developing protocols utilizing this disruptive security method for engineering systems, software applications and supply chain management - with plans of eventually using this technique during every stage of weapon systems development.
Cisco
Californian tech giant Silicon Valley Technology Group believes blockchain will be an excellent way for IoT applications since its distributed ledger structure eliminates single points of failure while encryption safeguards private information. Given how rapidly the Internet of Things has expanded over the years, this concept carries much weight if chosen as their preferred network; having such support from an influential IoT firm only adds further credibility! It's always beneficial having one on board.
Hashed Health
Hashed Collective from Tennessee-based Healthcare Innovation firm Hashed Health seeks to assist healthcare institutions with adopting blockchain technology. Comprising three entities -- Hashed Enterprise, Labs and Hashed Health -- these three components specialize in different areas related to blockchain usage in healthcare environments, such as patient data sharing networks or secure internal communications protocols aimed at hospitals.
Read More: How Blockchain Technology Works and Is Changing the World!
Blockchain-based Solutions are Associated with Security Risks
Before beginning to manage Blockchain solutions, we must understand their risks. Specific risks depend on which blockchain type you employ - we'll explore various types of blockchains with decreasing risks and rising security:
- Anyone can validate transactions and join public blockchains. They tend to be more volatile (such as cryptocurrencies). The blockchain is risky, as anyone can join it without restrictions or control.
- The membership of private blockchains is usually restricted to business networks.
- Blockchains without permissions are not restricted to processors.
- Permissioned Blockchains enable the ledger to remain encrypted, so only relevant participants can view it. Only those meeting a "need-to-know" criterion can decrypt it.
Other risks associated with blockchain can be categorized into three broad categories:
- Business and Governance: The business risks include reputational risks, financial risks, and risks related to compliance. Governance risks are largely a result of the decentralized nature of blockchain solutions. They require strict controls over decision criteria, governance policies, access management, and identity.
- Process: The risks associated with a Blockchain solution are related to the different processes required to operate and be built.
- Security risks can be caused by technology: the technology used to support various business processes may not always provide the most secure solution.
Models of Blockchain Security Threats
Security should always be assessed about its threat model. Although blockchain applications were intended for robust records integrity, other aspects may still be compromised and lead to losses, such as inadequate security measures, weak access controls or loose key management. To effectively secure such applications, you should create a threat model and identify weaknesses immediately.
STRIDE Model The Spoofing Tampering Repudiation Information Disclosure Denial of Service Attacks and Elevation of Privilege (STRIDE model) is an established tool used for analyzing relationships and recognizing threats while simultaneously helping identify weaknesses or vulnerabilities of these relationships and suggesting mitigation solutions.
Actors typically own and manage external components like identity and access management (IAM), multi-factor authentication (MFA), PKIs, audit/regulatory systems or audit management solutions that come from third parties - these should all be thoroughly assessed before becoming part of an overall solution, considering the blockchain threat model as needed.
Three main types of threats can be identified:
- These threats are unique to the blockchain.
- With blockchain technology, traditional threats are given a new dimension.
- Traditional threat management - these are business-as-usual threats that must be dealt with for any solutions.
Threat Landscape Changes
- Blockchain introduces paradigms in this IT infrastructure that are not fully understood. Most vulnerabilities are in the individual components and how they're stitched together.
- Building trust between actors in a system that includes many can be difficult. Each actor may have an identity management mechanism.
- To comply with privacy laws (GDPR, etc. ), finding a good balance between collecting enough information about system actors to identify them and securely managing and disposing of this information is crucial.
- It is important to identify attacks across the landscape of distributed assets.
- All network participants must coordinate detection, response and recovery.
- Only by analyzing the data of multiple participants in a network can "structured" attacks be detected. The most successful attacks against a Blockchain target the infrastructure and supporting applications. The relationships between the participants and various parts of the blockchain system must be orchestrated carefully. The attackers may exploit the system's complexity by launching attacks that exploit relationships in subtler ways.
The Traditional Threats take on a New Meaning
- The blockchain's infrastructure is vulnerable to attacks. Smart contracts are also susceptible.
- Impersonation of users and the improper elevation of privileges can create new risks with a blockchain-decentralized solution.
- Data from a blockchain can be altered or even stolen. This can pose a serious threat to the overall solution.
- A blockchain solution can be compromised by keys or certificates that have been manipulated.
- Service disruptions can be another threat.
- Malicious transactions/repudiation can give rise to additional threats.
Traditional Threat Management
- The key to any solution is penetration testing. This applies equally well to blockchain solutions.
- Scanning for vulnerabilities in an entire solution can mitigate many known threats.
- It is important to implement threat insights, detection and remediation methods.
- Plan your response to incidents and recover from them.
- It is important to implement best practice mechanisms for identity management.
- Blockchain solutions must include business continuity and disaster recovery planning.
Threat models cannot be created that apply equally across all blockchain apps; each will typically feature similar assets, actors and use cases. To address this, this article proposes an element-specific threat model as the foundation for more detailed security analyses in particular projects.
What is Needed to Create a Blockchain-based Solution that's Secure?
For a secure blockchain solution, develop a risk model that covers business, governance and technology risks. Assess threats posed against it before creating a model of those threats, as illustrated here. Additionally, establish security controls that mitigate any associated risks or threats using three categories as indicated here:
- Implement security controls unique to the blockchain.
- Use conventional security measures.
- Implement business controls on the blockchain.
Read More: What Causes A Bitcoin Transaction To Take So Long?
Blockchain Security Controls are Unique
Consider your Blockchain infrastructure critical infrastructure and take appropriate precautions against security risks to ensure all necessary measures are in place for its protection. Implement and enforce industry certification standards; regulate access; partition; and utilize best practice namespacing methods to keep data secure and safely organized.
- Namespacing and channels are needed to partition the solution so that it can accommodate digital assets for each member of the platform. The Namespacing feature allows users to control access to digital assets on the platform. This will also save you money, as making the changes later may involve rework. Use best practices to partition the network and the company.
Define and Enforce Appropriate Endorsement Policies by Business Contracts:
- Blockchain solutions use endorsement policies that define criteria to be met to verify that a submitted transaction is valid. For example, the number of signatures and which organizations are required. The policies must be tied to the smart contract to ensure the safety of any digital assets or associated data. These policies should be specified and scoped on a ledger-key level and a namespace (for an entire smart contract).
Implement Identity and Access Control to Ensure only Authorized Users can Access Blockchain Solutions and Data:
- Define policies to ensure that the appropriate level of access is granted to the correct individual and for the proper use. The blockchain platform should onboard new members using appropriate access and identity mechanisms. A defined off-boarding procedure should be in place to prevent any malicious activity (information exfiltration) using different methods. Implementing audit logs and access procedures to notify the operation team about any suspicious activity is important.
- Tokens such as OAUTH and OIDC should be used for authentication, authorization, and verification if the organization uses its own IAM system. The same applies to the other members of the consortium. The key decisions about whether consortium members will be IDPs (Independent Development Partners) or Service Providers (SPs) should all be taken up-front.
Hardware Security Module (HSM):
- An HSM is essential to protect the keys to blockchain identities. Importantly, each organization must have a partition within the HSM to store the keys. The HSM is used to secure the key. HSM's partitioning process allows each organization to have a partition that has separate admin roles and rights (crypto user, crypto officer, super admin etc.). To perform partition operations for each partition.
Use a Solution that Manages Privileged Access (PAM) for Escalated Action:
- Use a PAM to ensure that only the users with the right privileges can access components used for administration or change management. It is important to do this because the platform could contain confidential data, such as transactional payment information for members and users.
- PAM should include password rotation, separation of roles and effective segregation. Configuring end-to-end logs to record flows from entry to departure is also crucial. Secrets should be tied to ticketing systems, and each secret should have an approved reviewer. Each instance of administrative accessibility should be linked to a ticketed change or approved ticket.
API Security Best Practices: Use Them to Protect API-based Transactions
- The primary way to communicate between different components of a Blockchain solution is through APIs. APIs must be restricted to a transaction and protected against misuse. Although API security is broad, three main controls should be implemented for every API: Identification, Authentication, and Authorization. Not only is it important to use an industry standard such as OAUTH to standardize interactions, but also to secure APIs.
Use a Secret Store to both Apply and Gain Privileged Access:
- Several blockchain components interact, both with APIs and with user transactions. These transactions can be based on passwords or tokens. The keys need to be encrypted and stored in a secret store. Access at runtime must be restricted based on usage. Secret stores must support auditing at granular levels for threat management and compliance.
To Protect Data/information, Adopt a Classification System:
- Data classification is necessary to ensure data security and privacy. All members of the Blockchain solution must adhere to a strict data classification policy.
Protect Sensitive Data with Privacy-preserving Technology:
- Use permissioned ledgers where privacy is an important design principle and implement controls that protect members' personal information. Enforce privacy-preserving controls for security to conceal transaction data, including the creator of the transactions and transaction details.
Secure Data and Applications Against Vulnerabilities:
- Use DevOps for automated application vulnerability scanning throughout the lifecycle of development. Data classification analyses must also be used to determine the level of data security (such as database and application) at which data is implemented.
Access Control is Enforced in Smart Contracts:
- Smart contracts form a critical part of any blockchain solution. They enforce policies aligned with business goals, so all smart contract aspects must be protected. Access control for smart contracts' lifecycle management should be a priority, with fine-grained permissions within smart contracts and the processes or applications with which the smart contract is expected to collaborate.
Use Trusted Platform Modules (TPMs) for the Sensitive Execution of Code
- Some solution components are critical, so they should be based on trusted platform modules. HSMs can store cryptographic data. The HSMs also allow for privacy-preserving execution of chain code so that nodes' administrators cannot interfere with execution.
Securing Communications Internally as Well as Externally:
- Ensure that communications between internal and external components on your platform are sent through an extremely secure channel. Transport Layer Security Solutions (TLS), whether standard or mutual, can help achieve this. Security can also be increased by using an IP list and key rotation.
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Conclusion
As this article details, this series covered key components necessary to secure a blockchain system. In the future, the solutions you deploy must align with the blockchain security reference model and architecture to guarantee optimal safety and protection of sensitive information.
