With cyberattacks on the rise and cybersecurity becoming increasingly important, the first question many people ask about any new technology, such as blockchain, is, “How secure is it?” The technology has become increasingly prevalent in recent years as the cryptocurrency markets have moved toward center stage. One reason for its rapid adoption is that blockchain is designed to offer unparalleled security to digital information.
To really understand blockchain security, the risks, and ways to minimize them, we must first understand what blockchain is.
Simply put, blockchain is a shared, immutable ledger that facilitates recording transactions and tracking assets within a business network. Blockchains are best known for their crucial role in cryptocurrency systems for maintaining a secure and decentralized record of transactions. One key difference between a typical database and a blockchain is how the data is structured. A blockchain collects information into groups, known as blocks, that hold sets of data. Blocks have certain storage capacities and, when filled, are closed and linked to the previously filled block, forming a chain of data known as the blockchain. All new information that follows the newly added block is compiled into a new block, which will then also be added to the chain once it is filled.
What sets blockchain apart from other online transaction types is that data is replicated, stored, and verified across multiple nodes rather than held by a single central authority. When a user requests a transaction, the transaction details are broadcast to all nodes in a peer-to-peer fashion. This prevents anyone from stopping or censoring the transactions by certain individuals.
Benefits of Blockchain
- Eliminate the need for centralized control and the additional costs
- Trust is distributed between blockchain members
- Transactions are digitally signed using an asset owner's public/private key pair
- Once recorded, data in a block cannot be altered retroactively
- Open, distributed ledgers record transactions between two parties efficiently and in a verifiable and permanent way
- Transactions don’t have to be just data – they can also be code or smart contracts
With blockchain technology, we no longer need a third party to swap two digital assets, which is why it is decentralized. Instead, we only need to trust a small program on top of the blockchain, called a smart contract, to correctly encode the transaction logic.
While blockchain technology is promising, there’s still a lot of work to do to ensure blockchain security has evolved sufficiently to support broader adoption. 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 security and have succeeded in various hacks and frauds over the years.
Blockchain Security Challenges
Blockchain isn’t perfect. There are ways cybercriminals can exploit blockchain security vulnerabilities to cause severe damage. Here are four common ways that hackers can attack blockchain technology.
- Routing attacks: Blockchains rely on massive real-time data transfers. Resourceful hackers can intercept the data on its way to ISPs (Internet Service Providers). Unfortunately, blockchain users don’t notice anything amiss.
- 51% attacks: Large-scale public blockchains use a massive amount of computing power to perform mining. However, a group of unethical miners can seize control over a ledger if they can bring together enough resources to acquire more than 50% of a blockchain network’s mining power. Private blockchains aren’t susceptible to 51% attacks, however.
- Sybil attacks: Named for the book that deals with multiple personality disorder, Sybil attacks flood the target network with an overwhelming amount of false identities, crashing the system.
- [Phishing attacks](https://www.certik.com/resources/blog/technology/phishingattack#home): This classic hacker tactic also works with blockchain. Phishing is a scam in which cybercriminals send fraudulent but convincing-looking emails to wallet owners, requesting their credentials.
The whole point of using a blockchain is to let people - in particular, people who don’t trust one another - share valuable data in a secure, tamperproof way. That’s because blockchains store data using sophisticated math and innovative software rules that are extremely difficult for attackers to manipulate. But the blockchain security of even the best-designed blockchain systems can fail in places where the fancy math and software rules come into contact with humans, who are skilled cheaters, in the real world, where things can get messy.
How to Combat These Challenges
Blockchain security involves understanding the risks of blockchain networks and managing them. When establishing a private blockchain, ensure it's deployed on secure, resilient infrastructure. Poor underlying technology choices for business needs and processes can lead to data security risks through their vulnerabilities.
As blockchain remains a relatively new technology that is continually evolving, its security challenges are evolving as well. In response to evolving challenges, CertiK continually develops new services to address them.
While blockchain security poses potential risks, there is much that cybersecurity professionals can do to mitigate these threats.
The first step in blockchain security is smart contract audits to identify vulnerabilities in the smart contract. Through CertiK’s smart contract audit service, our industry-leading audit methodology and tooling include a review of the code’s logic, with a mathematical approach to ensure the program works as intended. After an initial review, CertiK shares its findings and recommendations for resolving the issues with the client. This process ensures that the client is aware of the issues and has the information needed to fix them, ensuring the contract's smoothness and correctness.
Blockchain penetration testing is a security assessment conducted by ethical hackers or security professionals to assess the security strength of a blockchain-based solution or application. The main aim of blockchain penetration testing is to uncover vulnerabilities and security loopholes and identify misconfiguration errors in the solution. By performing Blockchain penetration testing, organizations gain insights into the overall security posture of their blockchain systems and can fix potential weaknesses in their blockchain-based solutions or applications. CertiK’s penetration testing service offers a safe and in-depth attack simulation to expose the most complex vulnerabilities on your crypto exchanges, wallets, and dApps. Our continuous pen-testing process follows six key steps for discovery, testing, reporting findings, and re-testing once fixes are made.
CertiK’s Skynet service, which essentially acts as an antivirus for smart contracts, is a scalable security solution that leverages automated technologies to check deployed smart contracts for vulnerabilities. Skynet utilizes real-time data to provide actionable security insights. Analyzing metrics such as the number of transactions interacting with a protocol, the number of discrete users, and the number of events emitted by a protocol can provide a wealth of information that paints a specific picture of a platform’s functioning over time. Individual traders and investors can use these tools to monitor the platforms and projects in which they have invested.
While blockchain is perhaps one of the most secure data protection technologies out there today, taking its security for granted would be folly. As the blockchain technology evolves, so will its vulnerabilities, and we must stay one step ahead.
