The Benefits and Vulnerabilities of Blockchain Security

Blockchain is a technology that’s still in its infant stage.

Commonly associated with cryptocurrencies, numerous industries are starting to move their payments and transaction needs to the blockchain.

Blockchain is so versatile that besides recording financial transactions, it can store medical records, conclude binding agreements, track the flow of goods, store personal credit records, track the provenance of artwork, and even verify payments through a supply chain.

Blockchain started as the technology behind Bitcoin and has since grown into a promising mitigation technology for cybersecurity.

As data breaches continue to be a problem for organizations worldwide, with each breach costing an average of $3.86 million in 2020, blockchain offers companies a way to save money and safeguard their data and operations.

Before we jump into how different industries are leveraging blockchain security, let’s understand blockchain technology.

What is Blockchain?

Blockchain is a data structure, or distributed ledger technology (DLT), that records transactions between multiple computers, ensuring more security, transparency, and decentralization for user and company operations.?The blocks of data are interconnected, forming a chain of records controlled by no single authority and open to any and every member of the blockchain.

Thus, the chances of fraudulent activity or duplication of transactions are eliminated without the need of a third party.

Once information is stored on the blockchain, it’s immutable. The blockchain secures each transaction with a digital signature that proves its authenticity. Through the technology’s encryption and digital signatures, the data stored is tamper-proof and cannot be changed.

Any industry can use blockchain. This is because any digital asset or transaction can be inserted into the blockchain. The new technology is considered a reliable cybersecurity protocol due to its capabilities of indicating any foul play and providing certainty in the integrity of transactions.

Is Blockchain Security the Future?

Like many innovations, blockchain started as the supporting technology for a specific disruptive product: Bitcoin. Now, blockchain’s popularity has expanded across the cloud, growing into a promising mitigation technology for cybersecurity at large.

In today’s digital age, our information is being stored and shared online. Almost all businesses and organizations rely on digital means to conduct transactions and record history. This dependence on ever-evolving cloud storage technology and online data transfers has brought lapses in security protocols that regularly expose sensitive information to malicious actors. Therefore, finding a reliable cybersecurity protocol that can handle the always-changing way society deals with big data is vital.

Industries across the board are latching onto new technologies that aim to improve data and network integrity, and right now, blockchain security is leading the way.

Blockchain presents many benefits to cybersecurity, but it doesn’t come without its vulnerabilities too.

Let’s look at the benefits first.

Benefits of Blockchain Security

The advantages of blockchain revolve around one of its main characteristics – decentralization, ensuring a higher level of data integrity throughout multiple operations.

Decentralization of Storage Systems

In recent years, there have been millions of cyber attacks on organizations. And one common element between all the organizations is that they used a centralized system. This means that a hacker can access a large amount of a company’s critical data in one place.

Take, for example, the WannaCry ransomware attack in 2017. The attacks impacted roughly 230,000 computers in 150 countries. WannaCry targeted vulnerable computers that had yet to update their Microsoft Windows operating system.

Once inside the computers, attackers stole user information, which would be returned for a ransom. Although there’s no guarantee, if not paid, hackers would permanently delete the data. It’s estimated that the WannaCry ransomware attack caused $4 billion in losses across the globe.

Shifting to decentralized systems is a way to prevent ransomware, like WannaCry, from taking advantage of a single vulnerability point in a computer.

With a centralized system, data is typically stored, updated, and managed through one location rather than spread out across many. In contrast, with a decentralized system, data relevant to respective sites are stored and maintained independently of a central hub.

Blockchain follows this rule with data spread across multiple computers. Since the same data is distributed and synchronized in several independent locations, the prospect of hacking the entire system makes cyber attacking complex and cumbersome.

Secure Messaging Communication

The advancement of our networks has led to an evolution of how we communicate. Currently, organizations send messages through multiple digital channels allowing the transfer of various file formats. This flexibility has improved production and collaboration but has also brought its risks through increased vulnerability points.

To maintain secure networks, message platform developers implement end-to-end encryption (E2EE) in their applications. This method encrypts information so that only the players engaged in communication can read the messages, excluding Internet service providers, the app developer, the government, or anyone else

Blockchain can build on the advantages of current E2EE solutions, developing an even more secure environment for users. Blockchain can enable cross-messenger communication capabilities through a standard security protocol, allowing for a unified API framework that secures all data exchange processes

For example,?Sense chat is a blockchain-enabled messaging platform that operates over existing services like Kik, WeChat, Slack, Skype, Facebook Messenger, and beyond. Features include anonymous connections, peer-to-peer video, and crypto-friendly messaging.

Blockchain Security Vulernabilities

Before discussing blockchain’s potential vulnerabilities, it’s important to note that these vulnerabilities vary based on the blockchain type, namely public and private blockchain.

Public blockchain networks are open and allow any user to join, ensuring their anonymity. Public blockchain leverages internet-connected computers for validating transactions alongside achieving consensus. Ethereum is an example of a public blockchain.

On the other hand, private blockchain networks depend on identity for confirming membership and access privileges. For example, the investment banking company, J.P. Morgan, uses a private blockchain network to simplify, streamline, and verify transactions and contracts.

Attacks to blockchains vary according to whether they’re public or private networks, but there are four primary ways hackers threaten blockchains: phishing, routing, Sybil, and 51% attacks.

Phishing Attacks

Even with all the security features blockchain offers to organizations and users, they are still susceptible to phishing attacks. This scam attempts to attain a user’s credentials without their knowledge through email.

Fraudsters send wallet key owners emails posing as a legitimate, authoritative source asking users for their credentials using fake hyperlinks. User’s credentials and other sensitive information in possession of hackers can result in losses for the user and the blockchain network.

Routing Attacks

Blockchains rely on real-time, large data transfers. Hackers can intercept data as it’s transferring to internet service providers hijacking IP prefixes or dropping connections momentarily, preventing the system from reaching consensus.

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 or currencies.

Sybil Attack

In a Sybil attack, hackers create and use many false network identities to flood the network and crash the system. The name derives from a study about a woman named Sybil Dorsett, who was treated for Multiple Personality Disorder.

Carrying out Sybil attacks, hackers can gain disproportionate influence over the honest nodes on the network if they create enough fake identities. They can then refuse to receive or transmit blocks, effectively blocking other users from a network.

For now, no known detection or prevention method exists for this type of attack, and if they achieve large scales, they may become what is called 51% attacks.

51% Attacks

Cryptocurrency 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 controlling the ledger and manipulating it to reverse transactions.

In 2018, three renowned cryptocurrency platforms experienced issues from 51% attacks. The three platforms were Ethereum Classic, ZenCash, and Verge. Globally, enterprises lose around $20 million annually due to 51% attacks.

Blockchain Security is Still Evolving

Blockchain is a relatively new technology, but its adoption in multiple areas beyond cryptocurrency is quickly increasing.

With increasing pressure to improve cybersecurity being a universal force in organizations worldwide, effective new solutions are required to ensure system integrity. Blockchain’s unique benefits, such as decentralization and data transparency, open a whole new array of possibilities for security solutions.

Interested in learning more about innovative technology being leveraged for cybersecurity purposes?

Download our “Next Generation Network Imperative” Whitepaper to find out more about the future of cybersecurity and other next-generation technologies.

The International Data Corporation (IDC), a world-renowned global market intelligence firm, was commissioned to complete this study.