Cybersecurity Issues in Blockchain: Challenges and Possible Solutions

Blockchain technology, initially introduced as the backbone of cryptocurrencies, has rapidly expanded its reach into various industries. Its decentralized and "immutable" nature has attracted widespread interest due to its potential for enhancing security, transparency, and efficiency. However, while blockchain offers promising advantages, it also presents a unique set of cybersecurity challenges, and this is what this article is about  – the issues, mainly, and not the blockchain technology that almost everybody considers "unbreakable," but before we continue, what is blockchain?

It is a dispersed and irreversible arithmetical recording technology that secures all records and verifies transactions across a network of computers. It relies on cryptographic techniques to ensure data integrity and transparency, making it tamper-resistant. Each transaction is linked to the previous one, forming a chain of blocks and creating a transparent and trusted system without a central authority. In other words, cryptography is at the core of blockchain security. It ensures that data transmitted and stored on the blockchain remains confidential, authentic, and tamper-proof.

Cryptographic Techniques Utilized in Blockchain Systems

There are several cryptographic techniques utilized in blockchain systems, with some of the most popular including:

• Hashing Functions: usually "one-way" mathematical algorithms that convert input data into a fixed-size string of characters, known as a hash. The output, or hash, is unique to each input, making it practically impossible to reverse-engineer the original data. Blockchain utilizes hash functions to create digital signatures, secure data storage, and link blocks in the chain.
• Digital Signatures: Provide authentication and integrity for transactions on the blockchain. When a user initiates a particular transaction, the user's private key is used, and a unique cryptographic key is only known to them. To confirm the veracity of the presented key, the sender's public key is used to confirm such a request, ensuring that the transaction came from the genuine sender and has not been altered in transit (a combination of symmetric and asymmetric).
• Merkle Trees: These are a data structure used to efficiently verify the integrity of large datasets. In blockchain, Merkle trees enable nodes to verify the authenticity of transactions in a block without storing the entire transaction history. A single Merkle root represents the entire set of transactions in a block by recursively hashing transaction data in a tree-like structure.
• Elliptic Curve Cryptography (ECC): Widely used in blockchain for generating key pairs and facilitating secure digital signatures. ECC offers a high level of security with smaller key sizes, making it computationally efficient, which is crucial for resource-constrained blockchain networks. Unfortunately, this is one of the most secure algorithms, but multiple "experts" do not know how it works in the backend. Task yourself to expand on this topic, if looking to better understand blockchain.
• Consensus Mechanisms: A set of protocols used to achieve agreement among distributed nodes in a blockchain network about the validity and order of transactions. There are several consensus mechanisms employed in blockchain networks, each with its strengths and security considerations, for example:
  • Proof of Work (PoW): It is a consensus mechanism used in the first and most well-known blockchain, where miners contend to resolve intricate mathematical "enigmas" with the first one to solve it and increase the block count of the chain. This method entails noteworthy computational "muscle," making controlling the network problematic for a single malicious entity. The security of PoW relies on the assumption that an attacker would essentially need extra computational supremacy than the network as a whole to execute a successful attack. In PoS and other consensus mechanisms, validators must collude and control a significant portion of the network to alter transaction history.
  • Proof of Stake (PoS): An alternative consensus mechanism that selects validators to create new blocks based on the number of coins they "stake" or lock up as collateral. Contrast PoW; PoS relies on the economic stake of participants and not on their computational power. PoS is generally considered more energy-efficient than PoW, but its security relies on the assumption that validators will act in the network's best interest, as they risk losing their staked coins in case of malicious behavior.
  • Delegated Proof of Stake (DPoS): It is a variant of PoS where "stakeholders" decide who is responsible for block creation and network governance. DPoS aims to achieve faster transaction processing by reducing the number of validators, but it introduces potential centralization risks if a small number of entities control the majority of the voting power.
  • Practical Byzantine Fault Tolerance (PBFT): (A concept few people know, even with an IT background, but determinant in cryptography.) PBFT is a consensus mechanism that prioritizes speed and efficiency by allowing nodes to agree about transactions without solving computationally intensive dilemmas. PBFT requires a predetermined number of trusted nodes to work correctly and is mostly used in "permissioned" blockchain networks, where participants are known and trusted.

PoW, PoS, DPoS, PBFT, and the others listed above (as examples) are also considered tampering resistant, but to better understand the concept, we must understand what tamper resistance means in this specific context and a system or technology can withstand unauthorized alterations or modifications. In the context of blockchain, tamper resistance ensures that once data is recorded on the blockchain, it becomes practically impossible to change or delete without detection, ensuring the integrity and security of the information stored on the distributed ledger. Until this point, you are most likely convinced, without reading anything else, that blockchain is the savior of the world, and it is, probably, but not yet.

As a scattered "record book" technology, blockchain has introduced a paradigm shift in how data is stored, verified, and transmitted. Its core features of decentralization, consensus mechanisms, and immutability make it an attractive choice for various applications such as supply chain management, healthcare, finance, and more.

Cybersecurity Challenges with Blockchain

Despite its numerous advantages, blockchain is not impervious to cybersecurity issues because PoW, PoS, DPoS, and PBFT (just to mention some of the most popular) are linked to some cybersecurity challenges, for example.

• 51% Attacks: In proof-of-work-based blockchains, a 51% attack occurs when an attacker gains control over more than half of the network's computing power, allowing them to manipulate transactions and double-spend coins.
• Smart Contract Vulnerabilities: Smart contracts are self-executing pieces of code, and any vulnerabilities in their design can lead to severe security breaches, for example, infamous smart contract exploits a compromised system called "DAO hack" (the DAO hack refers to a significant cybersecurity incident in the blockchain world when an attacker exploited vulnerabilities in the Decentralized Autonomous Organization (DAO) smart contract on the Ethereum blockchain in 2016.) The attacker managed to drain millions of dollars’ worth of Ether, resulting in a controversial hard fork to reverse the theft.
• Private Key Management: Blockchain users must manage their private keys securely to prevent unauthorized access to their digital assets. This is obvious, right? How do you implement an outstanding solution in practice? Everybody involved with anything related to IT knows that protecting the private key and the public is vital to secure the data. No other way around, period.
• Sybil Attacks: Involve creating multiple fake identities to gain control over a network or voting process, compromising the integrity of the blockchain.
• Forks and Chain Reorganizations: Blockchain forks can create alternate chain versions, leading to reorganizations. The two concepts occur in blockchain networks when the consensus protocol faces conflicting versions of the blockchain's history. Forks can be either soft or hard, with soft forks being backward compatible and hard forks creating a permanent divergence. Chain reorganizations happen when a longer chain is discovered, causing the network to adopt the new chain as the valid one. These events can impact transaction confirmations and require careful handling to maintain the integrity of the blockchain.
• Insider Threats: Insider threats occur when individuals with authorized access abuse their privileges to compromise the blockchain system. This could happen within the development team or even among network validators. Sounds almost impossible because people developing blockchain technologies are trusted, right? Another wrong assumption. It is an evolving and problematic topic more common than imaginable.
• DDoS Attacks: Decentralized applications and blockchain nodes are predisposed to Distributed Denial of Service attacks (DDoS), which can disrupt network operations.

How to Protect Blockchain Against These Risks  

If, after learning about the abovementioned challenges, the question becomes, what needs to be done to protect blockchain, here are some recommendations:

• For Consensus Algorithms, explore potential enhancements to make 51% of attacks more challenging to execute (of course, it is an expensive approach as more computational power must be required.)
• For Smart Contract Auditing: Implement rigorous auditing and testing to identify and rectify vulnerabilities before deployment (organizations tend to do exactly the opposite to this. Why? Leadership unequipped with specific expertise, what I called the "sweet talkers' effect."
• Implementing multi-factor authentication for private key management adds an extra layer of security (the public is equally important, which is a common misperception as many IT "experts" consider that the public keys can be managed via web browsers only).
• For Sybil Attacks: Implement techniques to detect and prevent attacks, including reputation-based systems and proof-of-stake mechanisms.
• As per Forks and Chain Reorganizations: Use different tools and strategies, for example, soft and hard tokens (instead of just one).
• Incorporate Identity Management and DDoS Protection Mechanisms to prevent insider threats, unauthorized access, and early detection and remediation.

Conclusion

Blockchain technology has brought about significant advancements in security and transparency, but it also comes with cybersecurity challenges. The foundations of blockchain security lie in the ingenious application of cryptography, consensus mechanisms, and immutability. Cryptography ensures the confidentiality and integrity of data, while consensus mechanisms enable distributed nodes to agree on the state of the blockchain without relying on a central authority. Immutability guarantees the tamper resistance of recorded data, making blockchain a secure and trustworthy technology for various applications. Understanding these fundamental principles is essential for building and utilizing secure blockchain networks and unlocking the full potential of this groundbreaking technology in the modern digital age.

By adopting robust security measures, leveraging advanced consensus mechanisms, and encouraging best practices in development and private key management, we can pave the way for a more secure and trustworthy blockchain ecosystem. As technology evolves, the industry must remain vigilant in staying ahead of potential threats and developing innovative solutions to safeguard the integrity of blockchain networks.

What is coming? Zero-knowledge proofs and homomorphic encryption, and after? The cycle continues: new methods of protection motivates the “bad people” to hack the new cybersecurity protections.