What does Blockchain Security Consist of?

What does Blockchain Security Consist of?

Blockchain security is a complex risk assessment procedure designed to ensure the security of a blockchain. It is usually achieved by the implementation of specific security frameworks, test methods or code practices which help to protect the blockchain from various frauds, failures or attacks. Blockchain security is crucial due to the importance of data stored on the blockchain, which must be kept safe. Thus, blockchains are frequently audited by the specialists, with best practices and cryptography algorithms being applied to secure the solutions.

A few words about cryptography

It is also important to mention specific algorithms, which are applied to reinforce the system and store the data in the most secure way. Each of them is adapted to special purposes and solutions, yet hit one and the same target of keeping the data safe from attackers and fraudsters. Although a blockchain is secure and transparent by design, those algorithms are meant to enhance these features even further.

- Digital signature. It is an algorithm based on asymmetric encryption and created using hash code, embedded into a message. Anyone (for example, a transaction addressee) can check the validity of the signature by means of a public key, while a private key is used to sign the transactions. This algorithm prevents any illegal transactions or withdrawals. The algorithm itself is complicated enough to disallow signature forgery. A good example is the ECDSA algorithm (a method of creating digital signatures with private and public keys, using a pointwise multiplication, a complex procedure which is too hard to be computed).

- Hashing (a transformation of an input deck of random size into bit string data of fixed size). Each transaction is hashed before being added to the block, and this hash includes the data from the current block and the initial block. Hashing algorithms on a blockchain creates the so-called ‘avalanche effect’, when even a minor alteration of the hashed data leads to major alterations. Thus, each change in a completed transaction will cause changes to the whole blockchain. There is a huge number of different hash functions known, which have the following features:

1. Function output is presented as a random one way function.

2. The output is determined (after input of the same data into the function, the output will be also the same)

3. Same hash values can not produce different messages

4. In case of even a minor input deck alteration the new hash-values will never correlate with the previous ones

By means of these features it is easy to detect any changes someone tried to hide, and the data can not be ‘garbled’ for reaching a particular result. A blockchain can be vulnerable to the notorious ‘attack 51’ (there is a rule that 50 percent plus one node or more should validate the change, and invalid transaction can pass in case if an attacker gains such control), however, it not an easy task on a large blockchain and can hardly pass unheeded.

- Peer-to-peer network. This algorithm is very popular and allows data and asset transactions without validation by a third party. It is one of the most attractive sides of decentralization. The transaction data is transmitted to all nodes and written onto the block, taking into account the verification of the previous transaction history. Then special protocols come up to allow nodes to agree and validate the transaction. No third party is needed to control the process and the risk of fraud and attack.

- POW (Proof of work). As shown by the title, each participant or node should do a specific (typically huge) amount of computation work to create a new block within the chain. Consequently, the more work is done and the more blocks are created, the more ‘valuable’ blockchain it builds. And the more secure also, as it is much harder to crack or break it.

Best practices

Best code practices are the rules employed to improve the software quality and reliability. It goes without saying that blockchains, to keep up their security, stability and transparency and stay attractive for the users, also employ a list of their own, specific code practices. So what specialists and developers should do?

  • Define and enforce endorsement agreements based on business contracts
  • Enable identity and access management (IAM) controls to handle data access in the blockchain
  • Execute suitable tokens (such as OAUTH, OIDC, and SAML2) to perform user authentication, verification, and authorization
  • Keep identity keys secure
  • Use privileged access management (PAM) solutions to secure blockchain ledger entries after suitable business logic
  • Protect API-based transactions with API security best practices
  • Use a data classification approach to protect data
  • Use privacy-preserving technologies for ‘sensitive’ information
  • Use TLS standard for internal and external communications
  • Create multi-factor authentication
  • Keep strong cryptographic key management
  • Leverage hardware security module (HSM) and security incidents and events management (SIEM)
  • Do regular vulnerability assessment and penetration testing (or ‘ethical hacking’)
  • Duly patch security loopholes to protect blockchain-based applications from vulnerabilities and data breaches
  • Get an industry-recognized security certification for the blockchain solution
  • Enforce compliance and other security controls for the solution
SmartState: Web3 security easier than ever

About SmartState

Launched in 2019 and based in Dubai, SmartState is one of the leading DeFi security auditing firms. We conduct security tests and check the code core, smart contracts and blockchain for all types of errors, vulnerabilities and other issues.

Although SmartState gave a start to operations with smart contract auditing of DLT-projects, from the very beginning, we made our services surpass the classic purview of smart contract audit and security testing. We specialize in manual testing, so the SmartState’s tech team of white-hat security professionals measure up a project’s git and offer guidelines and recommendations for its further advancement. Security audit reports review the threats and vulnerabilities with which codebases may be exploited in the future, as the network achieves scalability and expands to accommodate more use cases and functionality.

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SmartState is an independent audit company for DLT projects. It performs smart contract audit and security reviews and provides reco for improvements.