Here’s a quick question: have you ever tried to put a ship in a bottle? You have to be very meticulous; rig up a system of wires that easily compresses the ship so it can be delivered through the narrow opening of the bottle, and expand once it’s inside the bottle. Just like that with any software technology, such as Blockchain, there is a certain amount of meticulousness required. Without that meticulousness, there can be a disaster that can cost investors millions. Blockchain security issue is and will be the next big challenge in the coming years. Unless there is a system to identify the software bugs and the security issues and rectify them in a timely fashion. Much like the ship in the bottle: before you put it in the bottle, you need to create an apparatus that enables its delivery into the bottle and sustains its existence inside the bottle.
Every technology, regardless of how secure it appears to be, has certain vulnerabilities that can expose the sensitive data to the potential hackers who can do ‘God Knows What’ with it.
The last thing you want as a Fintech entrepreneur or business manager is the disaster like ‘WannaCry’.
We roamed the internet and found every possible Blockchain security vulnerability we possibly could.
For those who are new to Blockchain technology here is a quick definition to bring you up to speed.
Blockchain is a digital ledger arranged in various blocks to record each and every transaction that goes through the system. This increases transparency of the transactions and makes the process much more flexible than the conventional centralized processes.
If you think you need to learn more about Blockchain before getting into the nitty-gritty of security risks, read through this post: Blockchain Technology: How it will Reshape the Future.
Moving on.
In order to understand the extent of Blockchain security vulnerabilities, it is important to have a good understanding of Public and Private Blockchain.
Public Blockchain
The public blockchain is designated for the public. It includes Cryptocurrencies like Bitcoin, Ethereum, and many other altcoins that are accessible to Public. Anybody with a reasonable internet access and a computer can buy or sell public blockchain cryptocurrencies. (And yes, public blockchain is responsible for the plethora of cryptocurrency millionaires, if that’s what you were thinking.)
Private Blockchain
Private blockchains, on the other hand, partially work around the intermediaries. The private blockchain network requires special invitations that must be authenticated or validated by the network admin. These validations can also be done through a set of rules that can be placed in the system before the network starts.
The private blockchain is more restrictive in nature than the public Blockchain. However, the members may decide to give access to new entrants.
Public Blockchain Security Risks and Vulnerabilities
Cryptocurrency-mining conglomerates: Anybody who follows blockchain knows that the mining power is in the hands of countries like India and China. It is mainly because of the cheaper electricity and internet connectivity in these countries. This may cause monopolized control our blockchain and all the cryptocurrencies related to it, which can lead to centralization and a possible collision of the network.
Crypto Cyber Hacks: Inevitable cybersecurity attacks can drive the cryptocurrency value, which can result in a massive loss for the cryptocurrency investors and owners. These attacks could lead to disasters like DAO and Bitfinex exchange that can cause investors a substantial loss.
Blockchain code vulnerabilities: Blockchain technology is still new; its code can be easily compromised by hackers. This poses a great threat for those who have invested or are looking to invest in public Blockchain.
Invalid Transactions: Hackers are capable of making invalid transactions which essentially means that they can use cryptocurrency to make multiple transactions. This is called ‘Double Spending Attack’. In a double spending attack, the hacker makes more than a single transaction using a single coin in a fast payment mode.
Software Core Bugs: There is a possibility of bugs in the blockchain enabled technologies that may cause complications and security vulnerabilities that the companies (who employ Blockchain) are not yet able to handle.
Key Security: Blockchain system requires private keys for network accessibility. The private keys are provided to the admins or the participants of the network. In case the hackers access the key they can virtually attack everything belonging to that network. In other words, the security of the key relies on those having a direct access to the network.
Private Blockchain Security Risks and Vulnerabilities
Lack of Proper Node Transmission: Communication within a blockchain network happens through a system of nodes that transmit information from one block to another. In order to make sure that the integrity of the system is maintained, it is crucial to identify the nodes that transmit false information or are restricting the transmission of certain information.
Offline Nodes: Nodes can become uncommunicative at times and pose a security risk that can disrupt the information flow within the network. Remember that the nodes are responsible for carrying the information about the transactions to other nodes in order to create blockchain. In case the nodes become uncommunicative that flow can become disrupted and result in missed ledger entries.
Node Access Issues: In private blockchain network, participants or operators can choose to only allow certain nodes to perform verification. In this case, only the verified nodes will communicate transactions throughout the private network.
There are a number of risks in both private and public Blockchain networks. To mitigate the risks, Blockchain developers need to take into account numerous factors. We will discuss those factors in the next post. We will also look at some more security risks and possible ways to combat them.