Real-world Consequences of Network Security Breaches in Blockchain

Real-world Consequences of Network Security Breaches in Blockchain
Real-world Consequences of Network Security Breaches in Blockchain

Blockchain network security is crucial to blockchain technology as it protects data from unauthorized access. This article discusses some real-world consequences of network security breaches in blockchain. 

 

Blockchain technology generates a data format with intrinsic security properties. It is founded on cryptography, decentralization, and consensus concepts that ensure transaction confidence. 

 

Most blockchains or distributed ledger technology (DLT) arrange data into blocks, each containing a transaction or set of transactions. 

 

Each new block in a cryptographic chain connects to all the blocks before it, making it nearly impossible to tamper. 

 

A consensus process validates and agrees on all transactions within the blocks, ensuring that each transaction is truthful and correct.

 

Blockchain technology provides decentralization by allowing members of a dispersed network to participate. There is no single point of failure, and a single user cannot alter the transaction record. 

 

However, there are significant critical security differences among blockchain technology.

 

That being said, what is blockchain security?

 

Blockchain Security 

Blockchain security is the application of cybersecurity ideas, tools, and best practices to manage risk and prevent malicious attacks and unauthorized access on blockchain networks.

 

While all blockchains use distributed ledger technology (DLT), some have different functionality or security. 

 

While both public and private blockchains have benefits and drawbacks, their security models are fundamentally different due to their networks’ open versus closed nature. 

 

We will look at how private and public network security works. 

 

Public Blockchain Security  

Public blockchains, such as Bitcoin and Ethereum, are permissionless networks on which anybody may join and validate transactions. Public blockchain codebases such as Bitcoin and Ethereum are open source. 

 

This means it is freely available to the public and is constantly vetted by a community of developers who check the code for bugs, vulnerabilities, and other issues. 

 

The security, features, and efficiency of these blockchains are constantly examined and improved by leveraging the collective expertise of open-source communities. 

 

Simultaneously, hackers and malicious entities constantly review the code, looking for vulnerabilities to exploit. 

 

Who is Responsible for Securing a Public Blockchain?

While the developers are accountable for the initial source code and frequently inform the network’s progress through active involvement, the overall responsibility for protecting a public blockchain like Ethereum is distributed among all network participants worldwide. 

 

This comprises validators, node operators who keep the network running, and hundreds of thousands of coders. Users can also help to secure the network by exercising proper security hygiene. 

 

Because a public blockchain is decentralized, no single institution can claim responsibility for its security, making it resistant to many threats. 

 

Well, that is enough info on public blockchain network security. Let us take a look at private network security.

 

Private Blockchain Security

Private blockchains are exclusive networks with limited access, resulting in greater centralized control. This centralized control may improve their resistance to some external assaults. 

 

The operational entity is solely responsible for securing a private blockchain. Because these blockchains are centralized, there is a single point of failure, making it critical for the institution to develop effective security measures.

 

Although private blockchains benefit less from the decentralized and security-by-numbers approach of public blockchains, they are generally faster and more efficient since consensus techniques require less computational labor. 

 

However, because the entity granting permission also has jurisdiction over the network, there is a theoretical risk that the network will be shut down or manipulated, a security risk not normally found in public blockchains.

 

Now that we have understood the micro aspects of this work, let us take a holistic view of the security of blockchain technology.

 

How Blockchain Network Security Works 

Blockchain is based on a distributed digital ledger system. A blockchain network comprises a global network of computers known as nodes that validate and record transactions. 

 

There is no centralized authority or point of failure because each participant keeps a copy of the ledger. Every transaction, such as sending or receiving cryptocurrency, is recorded on a block. 

 

Before a block (a collection of transactions that occurred during a specific period) is added to the chain, consensus must validate it. This is where consensus mechanisms come in. 

 

There are various methods for reaching an agreement, but the two most used are Proof-of-Work and Proof-of-Stake. Miners compete in a Proof-of-Work system to solve computationally complex algorithms that validate transactions. 

 

In a Proof-of-Stake system, network participants secure a set number of tokens to run a node that validates transactions. Miners and stakeholders are rewarded for securing the network. 

 

This procedure assures that everyone agrees (or comes to an agreement) on the legitimacy of each transaction. 

 

When a block is completed, it is sealed and linked to the preceding block with a cryptographic code, producing a chain. 

 

By cryptographically linking each block and dispersing the ledger over multiple computers, any effort to tamper with a block would disrupt the entire chain. 

 

Any suspect activity can be readily recognized because the ledger is available to all participants.

 

Every participant in blockchain is responsible for ensuring its integrity. This technology underpins prominent cryptocurrencies such as bitcoin and ether, and it has enormous potential for the future of digital commerce and beyond.

 

Features of Blockchain Network Security

The idea that blockchain technology is impervious to security threats is false, although numerous unique structural elements reinforce its intrinsic security properties. They include:

  1. Decentralization
  2. Cryptography
  3. Immutability
  4. Transparency
  5. Consensus

 

Decentralization

Blockchains function on a network of computers (nodes) rather than a centralized server or authority. Because the system is distributed, the overall system is largely impacted even if a node or a set of nodes is compromised.

 

Cryptography

Every blockchain transaction is protected by cryptographic principles, which ensure data integrity and authentication. PKI provides users with a public key for receiving assets and a private key for safeguarding them.

 

Immutability

When a block is added to the blockchain, the content of that block becomes immutable, which means it cannot be changed or altered. This ensures that transaction records are never lost.

 

Transparency

As many blockchains are public ledgers, anybody can witness any modification or transaction, making criminal activity easily traceable.

 

Consensus

These techniques ensure that all nodes in the network agree on a transaction’s legitimacy. Proof-of-Work (PoW) and Proof-of-Stake (PoS) are popular consensus methods. 

 

PoW or PoS features make it computationally impossible for a single attacker to control most nodes, known as a Sybil Attack.

 

While these distinguishing traits are what make blockchain technology so innovative, there are still flaws that can be abused. 

 

Paradoxically, some of the characteristics of blockchain (such as immutability) can add new complexities if the system is compromised. 

 

Types of Blockchain Network Security Breaches

There are four blockchain network security breaches, which we will discuss below;

  1. Routing attacks
  2. Phishing attacks
  3. 51% attacks
  4. Sybil attacks

 

Routing Attacks 

Blockchains rely on massive data transfers in real-time. Hackers can intercept data while it is being transmitted to internet service providers. 

 

Because blockchain participants cannot see the threat in a routing attack, everything appears normal. However, criminals have extracted confidential data or currencies behind the scenes.

 

Phishing Attacks

Phishing is a scam designed to obtain a user’s credentials. Fraudsters send emails to wallet key owners that appear to be from a legitimate source. The emails employ bogus hyperlinks to request users’ credentials. 

 

Knowing a user’s credentials and other sensitive information can lead to losses for the user and the blockchain network.

 

51% Attacks 

Mining requires significant computational power, particularly for large-scale public blockchains. 

 

However, if a miner or a group of miners can pool enough resources, they can obtain more than half of a blockchain network’s mining power. 

 

Having more than half of the power means you have control over the ledger and can alter it.

 

It is also worth noting that this type of attack does not affect private blockchains.

 

Sybil Attacks 

In a Sybil attack, hackers establish and use many phony network identities to overwhelm the network and bring it down. Sybil is a well-known novel character who suffers from multiple identity disorders.

 

Real-World Consequences of Network Security Breaches in Blockchain

Security flaws in blockchain networks cause a slew of issues. Some of these include;

 

  • Loss of funds for users
  • Damage to the platform’s reputation, 
  • Increased market volatility, 
  • Regulatory scrutiny, 
  • Legal consequences, 
  • Higher security costs, 
  • Operational disruptions
  • Negative perceptions of the blockchain industry as a whole. 

 

Such breaches can result in financial losses, erode confidence, and generate a variety of difficulties that may necessitate extensive work to address and recover from.

 

Conclusion 

Blockchain security entails comprehending and managing hazards associated with the blockchain network. A blockchain security model is the idea to add security to these restrictions. 

 

Create a blockchain security model to guarantee that all mechanisms are in place to safeguard your blockchain technologies adequately.

 

To adopt a blockchain solution security model, administrators must create a risk model that addresses all business, governance, technical, and process concerns. 

 

As we have seen, the consequences of a breach in a blockchain network are not one anyone would like to experience, so we should ensure our blockchain network is highly secured.