The advent of blockchain technology and its mass adoption by businesses, individuals, and now nations, has propelled the relevance of blockchain-based entities. Used in multiple fields such as cryptocurrency and cybersecurity, it’s equally important to dedicate time and resources to ensuring blockchain security for the smooth functioning of its dependents.
Quick and easy processing along with the anonymity of the participants are the main advantages offered by blockchain technology. All this with the lack of an intermediary, blockchain placed information within blocks that was difficult to breach or alter. However, hackers have been able to target other aspects to misuse the blockchain technology and access sensitive information or steal data and currency.
7 Important Blockchain Security Issues
There may be multiple vulnerabilities hidden within the blockchain framework but let’s look at the most identified ones so as to prevent their further exploitation.
1. Scalability issues
Large-scale blockchains are the need of the hour as the needs of user firms are increasing day by day. This is a necessary step to assist in the multiple transactions and interact with other blockchain networks for the exchange and processing of data. However, while large-scale blockchains are possible, it’s very difficult to test them for their security. Therefore, as the untested areas grow along with the blockchain networks, this leaves openings wide enough for hackers to force them open.
The current ecosystem is not well-occupied with mandatory scaling opportunities along with capturing the rising number of vulnerabilities. This may even lead to the blockchain network committing simple mistakes at the cost of millions.
2. Lack of regulation
As it’s not accepted by most countries, especially as cryptocurrencies, blockchain technology still operates under the lack of regulatory standards. There’s also a lack of standardization which means the networks may often be unique to their situations and fixes applied to one may not suit the other. Therefore, the learning rate is low as developers cannot learn from the mistakes of others and have to figure out their own solutions.
3. Lack of proper testing
With the advancement in blockchain technology and adaptation in multiple fields beyond cryptocurrency, and smart contract security, it’s time that blockchain isn’t thought of as inherently secure. The coding segments of the network aren’t always tested for flaws or misconfiguration and are mostly experimental. Therefore, this leaves the door open for hackers to step in and find enough vulnerabilities to exploit the system.
4. Blockchain endpoint issues
Blockchains in themselves can boast of complete security, but blockchain-based transactions are still vulnerable to attacks, especially due to the endpoints. The final destination of most blockchain transactions is either a wallet or a virtual savings account, both of which can be exploited by experienced hackers.
Another point of security risk is the approval of third-party vendors for implementing blockchain transactions. This includes smart contracts, payment processing platforms, and other blockchain platforms, all of which are susceptible to loopholes. Such compromised websites and apps can be sufficiently exploited according to the hackers’ needs. One solution recommended by cybersecurity experts is the encryption of data sent through blockchain networks.
5. Cryptographic keys
Every blockchain service and its client interacts through the provision of keys, be it for a public or private network. Therefore, not securing these keys adequately even when using a dedicated system is not advised. The alternative is to use a hardware security module (HSM) which provides a number of advantages.
HSM doesn’t allow exporting or copying of the keys and they maintain a log regarding the usage of these keys. Logging its activity can prove quite useful if you’ve been hacked since it’ll provide details on how the hacker went about the act and what has been compromised.
6. Operational risks
The best blockchain security and strongest smart contracts cannot protect you from operational risks since these blockchain transactions need to be implemented on a well-connected and reliable system. This points at the third-party hosting or any cloud software that you may use for this purpose.
Beyond checking for popular standards for compliance such as SOC2, ensure transparency of procedure through resources such as the Cloud Pentest, Trust, Assurance, and Risk (STAR) registry. At the end of it, always ask your vendors and/or cloud service providers the difficult questions to get the necessary answers.
7. Lack of accurate information
There are security vulnerabilities that repeatedly occur in traditional software, examples of which are found in the Common Weakness Enumeration (CWE) dictionary. Most code-scanning tools use resources such as these to inform their attacks and different vulnerabilities such as buffer overflow or integer overflow. The problem arises due to the fact that CWE doesn’t cover blockchain security issues. At this stage, efforts are being made by multiple private and public organizations to rectify this oversight.
Even if you aren’t able to cover all of these blockchain security issues when in conversation with your service provider, always make sure that you’ve covered adequate research to know what questions to ask and the answers to be expected.