Blockchain technology is a significant innovation that powers cryptocurrencies like Bitcoin and reshapes industries. By 2024, statistics show that spending on blockchain solutions is expected to rise to $ 19 billion, showing the innovation's potential.
At its essence, blockchain operates as a powerful and unconventional database mechanism, facilitating transparent data sharing within business networks. This is achieved by organizing data into blocks intricately linked chronologically.
However, while blockchain technology is often known for its fundamental security, it is important to acknowledge that these networks are not entirely immune to malicious activities.
Our post explores blockchain technology features and highlights some security vulnerabilities affecting the technology.
Blockchain Technology Features
For blockchain to work, key features must be the cornerstones upon which the entire ecosystem is built. Here are a few main features:
- Decentralization – The network comprises a multitude of nodes or computers globally scattered. Unlike traditional systems, no intermediary or central authority controls the network. This feature fortifies the censorship technology and eliminates the associated vulnerabilities with single points of failure, ensuring the system remains available and resilient.
- Immutability – Once a transaction is engraved into the blockchain, it becomes eternally there in the digital stone. This feature means that it cannot be erased or even tampered with. This feature allows guaranteed data integrity, ensuring it is safeguarded, thus preserving the sanctity of recorded transactions.
- Transparency – As mentioned earlier, each transaction is documented on a public ledger, open for any scrutinization by anyone wishing to look at it. This creates an environment for trust among every participant since they can independently validate and verify the transactions happening within the network. There are no hidden agendas or secrets but only an unaltered, shared record of every activity.
The importance of Blockchain Technology
One importance of blockchain is the commitment to data integrity. Information entering the blockchain becomes sealed from deletion or modification without achieving consensus across the network. This characteristic makes blockchain technology ideal for constructing immutable ledgers, which are important in securing and monitoring important records like accounts, payments, and orders.
Additionally, blockchain incorporates built-in safeguards against unauthorized entries, thus guaranteeing a secure and consistent view of the transactions for all participants.
In supply management, for example, traditional database systems face several challenges. For instance, consider a shipment containing important critical medical supplies traversing international borders. Ensuring their specific condition and location is important as the goods exchange hands. Yet, the sender and receiver may individually claim to have updated the shipment's status – causing a trust deficit. In such a situation, a blockchain solution would provide a decentralized, secure, and reliable network through which traders can transfer medical products.
Statistics underscore the urgency for a solution like blockchain. As of June 2023, over 85 million users worldwide utilize blockchain.com wallet for Bitcoin block exploration. This user base actively engages with the blockchain, having about 405,376.125 transactions daily, showing the immense scale of blockchain's impact on global finance. About 10% of the global population and 16% of Americans own cryptocurrencies.
Blockchain Security Vulnerabilities
Despite the tamper-proof ledger of transactions it generates, there are vulnerabilities within blockchain infrastructure that can be exploited by people with malicious intent.
Over the years, several frauds and hacks have exposed the susceptibility of blockchain networks to fraudulent activities and cyber-attacks. In cryptocurrency especially, scams have become a notable facet of fraudulent activities.
According to the Federal Trade Commission (FTC), more than 46,000 individuals reported losses exceeding $1 billion to different crypto scams between January 2021 and June 2022. Remember that this figure only accounts for individuals who reported these losses to authorities, meaning the number could even be bigger. The main thing contributing to people's susceptibility to these scams is the general lack of understanding of how digital currencies work and what is needed to secure digital assets.
Given these complexities, here's where blockchain security comes in. Blockchain security embraces a holistic approach to risk management in a blockchain network, leveraging established cyber security frameworks, deploying assurance services, and adopting best practices to mitigate vulnerabilities and safeguard against fraudulent activities and potential attacks.
But what are the vulnerabilities blockchain technology can be threatened by?
- 51% Attack
In blockchain, a "51% attack" is a big problem. It occurs when one person or a group of individuals control more than half of a blockchain network's computers, giving them more power.
To understand why this is bad, it's important to comprehend the computational intensity of blockchain mining, mainly on large-scale public blockchains. Mining is the process through which transactions are validated and new blocks are included in the chain, which demands huge resources.
However, should a consortium rally enough muscle to surpass the 50% threshold, it effectively seizes the blockchain reins, breeding immense power over its ledger. Malicious actors could use disruptive actions such as manipulating transactions and disrupting the network's normal operation, creating chaos, and thus undermining its integrity.
That is why a 51% attack is defined as a security incident arising from a group of miners controlling over 50 percent of the network’s mining hash rate on a cryptocurrency blockchain. Previous victims of the 51% attack include Verge, Ethereum Classic, and Bitcoin SV.
Fortunately, private blockchains operating in controlled environments are not susceptible to 51% of attacks due to their fundamentally different trust model and structure.
- Sybil Attacks
Sybil attacks stand as a subtle and distinctive threat to blockchain security. In a Sybil attack, the attacker creates multiple fake nodes to control the network.
The assailant tries to plug the network with the client’s nodes that they control, making it possible for other users to join the attacker’s nodes. Once an attacker isolates your node from the authentic network, they can implement other attacks. Unfortunately, Bitcoin does not keep a count of nodes for anything, and the attacker can avoid relaying blocks or only relay those that he creates.
Most blockchain networks employ different "consensus algorithms" to strengthen their defenses against the attacks – such as delegated proof of stake, proof of stake, or proof of work, which protect against potential infiltrations. It's important to know that the algorithms do not completely prevent the attacks but make it highly impractical and difficult for the attacker to execute them successfully. For example, Bitcoin’s blockchain has new rules and consensus mechanisms that function as a barrier against attacks. It requires participants to incur costs and resources, making counterfeiting the network challenging.
- Private Key Security
These are your linchpins for your funds and digital assets. A weak private key will leave you vulnerable to malicious actors who may guess and crack it, thus gaining unauthorized access to your funds.
Users often use hardware wallets or secure password managers to store and generate private keys.
Data-at-rest encryption can help protect stored data to prevent theft of locally stored passphrases and private keys in crypto wallets.
- Phishing attacks
In the past year, cryptocurrency phishing has experienced an upsurge. There has been a 40% year-on-year growth in cryptocurrency phishing incidents. In 2022, there were 5,040,520 crypto phishing detection attempts compared to 3,596,437 in 2021, depicting the escalating danger posed by these schemes.
The attackers attempt to deceive users into revealing their sensitive credentials by sending deceptive emails that look like communications from trustworthy sources such as cryptocurrency wallet providers. The emails have counterfeit hyperlinks that users click, leading them to imitate login pages designed to steal their confidential information.
- Routing Attacks
Blockchain networks depend on seamless, real-time exchange of big volumes of data. In routing attacks, hackers capitalize on this vulnerability by intercepting data packets in their transit. What makes these attacks subtle is that everything appears normal. Data flows and transactions continue open, all while malicious actors covertly operate secretly.
Unlike other cyber threats, routing attacks evade immediate detection because they do not disrupt any outward network operations appearance. Therefore, blockchain users continue their activities, assuming their communications and transactions are secure. But, the fraudsters have seized the opportunity to extract sensitive data without the user’s knowledge.
- Endpoint Attack
In the blockchain network, this is the point where users interact with the blockchain through electronic devices such as mobile phones and computers. This is where the breach can be found. Hackers target these endpoints to copy the user's cryptographic keys. These attacks can manifest when users expose the keys, for example, saving keys as plain text files on a phone or laptop.
Additionally, hackers closely monitor user behavior and identify weak points that compromise your blockchain assets. Unlike other threats, endpoint vulnerabilities often result in tangible and visible results. Users can discover unauthorized access to their blockchain assets and notice suspicious device activity.
To curb these vulnerabilities, blockchain users and developers should remain vigilant, employing best practices by safeguarding browser experience with reputable browser extensions, employing link detection and antivirus programs, proceeding with caution with emails requesting sensitive information, making sure to cross-verify, avoid using open and public WI-FI networks and regularly update your operating system.
Securing Your Network with Pulsar Security
Developing a blockchain enterprise requires paramount security at each layer of the technology stack. It is not only about building a functional network but also how to manage permissions and governance to be secure.
Pulsar Security is your go-to security partner for safeguarding your network and data. Our specialized Vulnerability assessment examines your user practices, networks, and systems to identify potential vulnerabilities that cyber threats could exploit. By identifying weaknesses like unpatched applications or systems, we help you gauge the susceptibility of your blockchain network to any breaches.