• About Us
    • PRODUCTS

  • Blog
  • Contact
Blog Blockchain Protect Your Assets with Blockchain Security (Ultimate Guide)

DATE:

august 9 2023

AUTHOR:

Table of Contents

Protect Your Assets with Blockchain Security (Ultimate Guide)

Blockchain technology has transformed the way data is stored and shared, offering a decentralized storage and secure platform that has the potential to revolutionize industries from finance to healthcare. However, like any technology, blockchain is not immune to security challenges. This brief will explore some of the key blockchain security challenges and how they can be addressed to ensure the continued growth and adoption of this powerful technology.

What Is Blockchain?

Blockchain, a continuous sequential chain of blocks containing information built according to certain rules. Introduced in 2008, the Bitcoin system was the first application of the blockchain, a fully replicated distributed database across the entire network of nodes.

Currently, blockchain technology is used in areas such as financial transactions, IoT – internet of things, user identification, and is also relevant for banking institutions and government organizations.

How Blockchain Works?

A transaction block is a special structure for recording a group of transactions in the blockchain system. A transaction is considered complete and reliable when its format and signatures are checked, and when the transaction itself is combined into a group with several others and recorded in a special structure – a block. The contents of the blocks can be checked since each block replicates the previous. All blocks are lined up in one chain, which contains information about all operations ever performed in the database. The very first block in the chain – the primary block – is treated as a separate case since it does not have a parent block.

The connection between blocks is provided not only by numbering but also by the fact that each block contains its hash sum and the hash sum of the previous block. Changing any information in a block will change its hash sum. To comply with the rules for building a chain, changes in the hash sum will need to be written to the next block, which will, once again, cause changes to its hash sum.

If the block being modified is the last one in the chain, then making changes may not require significant effort. But if a continuation has already been formed after the block is changed, then the change can be an extremely time-consuming process. The fact is that usually copies of blockchains are stored on many different computers independently of each other.

What Is Blockchain Security?

Blockchain in cybersecurity refers to the measures and protocols in place to protect the integrity, confidentiality, and availability of data stored on a blockchain network. At its core, blockchain security works with the principles of cryptography, decentralization, and consensus.

Cryptography is used to secure the data on a blockchain by encoding it with complex mathematical algorithms that are nearly impossible to crack. Decentralization of data ensures that the information is distributed across multiple nodes, making it more difficult for attackers to manipulate or alter the data. Consensus protocols ensure that all nodes on the network agree on the validity of the data, preventing any single node from altering the blockchain’s ledger.

Despite these inherent security features, blockchain networks are not immune to security risks. To mitigate these risks, blockchain security measures include regular auditing and testing, the implementation of access controls and multi-factor authentication, and the use of decentralized identity solutions. As the use of blockchain technology continues to grow across industries, ensuring the security and integrity of these networks will be critical for their continued success.

Security Attributes of Blockchain

Security is one of the most critical attributes of blockchain technology. Several key security features contribute to the robustness of a blockchain network.

One of the most significant blockchain security attributes is its immutability. Once data is recorded on a blockchain, it cannot be changed or tampered with, making it an ideal platform for storing sensitive information. This immutability is enforced through cryptographic algorithms and the consensus of the network participants.

Another important blockchain security attribute is its transparency. All participants on the network can view the entire blockchain, ensuring that any attempts to alter or manipulate data can be quickly identified and addressed. This transparency also promotes accountability and trust, as all transactions on the blockchain are visible to all network participants.

Finally, decentralization is a critical security attribute of blockchain. By distributing data across a network of nodes, rather than storing it in a central location, the risk of a single point of failure or a successful attack is greatly reduced. This decentralized architecture also ensures that no single entity can control the network.

What Types of Blockchain Are There?

Blockchain technology has seen widespread adoption in recent years, revolutionizing industries from finance to healthcare. However, there are several types of blockchain, each with its unique characteristics and use cases. How do they differ from each other?

Private Blockchains

In private blockchains, only authorized participants are permitted to join the network. These are personalized centralized systems with a clear hierarchy of power. It makes no sense to use proof-of-work or proof-of-stake – information without delay gets into blocks formed as needed and does not require additional confirmation, which maximizes the speed of the network and minimizes the cost of digital transactions.

However, the distributed nature of data storage remains, it uses a digital ledger to store contents within the blocks that comprise the chain. Access to information can be general or have arbitrary restrictions, most often, we are talking about a system of information transfer within one company.

In a private blockchain, rule changes, transaction cancellations, etc. are easily implemented and mistakes can be quickly corrected manually. This is necessary, for example, in land registers – without the ability to correct errors, such systems can become unmanageable and lose legitimacy.

If participants start acting maliciously, it’s easy to detect and block them from accessing the network. On the other hand, despite internal personalization, restrictions on access to information can provide a higher level of privacy.

Public Blockchains

Public blockchains are, well, public. Anyone can read blocks, submit information to them, and participate in the consensus mechanism while remaining anonymous. Such blockchains are usually completely decentralized, that is, they do not have administrators or centers of trust.

The immutability and integrity of information are provided by cryptographic checks using mechanisms such as proof-of-work or proof-of-stake, which usually causes significant limitations in the speed of placing data in blocks.

Users of public blockchains are largely protected from the arbitrariness of developers: developers initially refused to act without agreement with user representatives. On the one hand, this increases the confidence that the program will not have functions hidden from users. On the other hand, under government pressure, developers can honestly say they don’t have the authority to do so, even if they wanted to. At the same time, changes in the operation of the network can become a problem, since at least half of the participants must agree with the innovations, but this does not protect against the division of the blockchain into parallel projects that support different protocols.

Most public blockchains are designed for cryptocurrencies.

Consortium Blockchains

In consortium blockchains, the negotiation process is provided by several pre-specified peer nodes. For example, a consortium of 15 banks agrees to validate a block with a multi-signature of at least 10 consortium members. The rate at which new blocks appear can be quite high. At the same time, the members of the concern can make access to information from the blockchain both public and restricted to a select circle, or introduce other quantitative, content, or time restrictions. These blockchains can be considered “partially decentralized.”

The limited number of trusted nodes makes it much easier to upgrade the system than with a public blockchain. But the operation of such a network is possible only if the main part of the nodes works in good faith.

Consortium blockchains are most useful for multiple organizations that require a single platform for conducting transactions or exchanging information.

Blockchain Security Challenges

Secure storage of a private key is the basis for secure transactions with cryptocurrency and other assets. The most common storage tool is the so-called “hot” wallets – Internet-connected applications for storing private keys and transactions with digital assets. There are various types of such solutions, but their use, for obvious reasons, is associated with increased risk. To hack them, most of the common attacks are used – from phishing to malware.

The architecture, cryptographic functions, and consensus algorithms of a decentralized blockchain network can also be potentially exploited, thereby jeopardizing the basic principle of blockchain – data immutability. The main types of attacks on the infrastructure of public blockchain networks are listed below. Many of them still exist in theory and are discussed as conceptual.

Blockchain Risks to Avoid

While blockchain technology offers unparalleled security and transparency, it is not immune to risks and challenges. Understanding and mitigating these risks is critical for organizations and industries utilizing blockchain. Here are some of the most common blockchain risks:           

Phishing Attacks

For cryptocurrency holders, the risks associated with phishing attacks are not only the obvious theft of authentication data for a cryptocurrency wallet or crypto exchange account. In addition to embezzling existing crypto assets, an attacker can use the data of saved bank cards or ask to re-enter the data of used cards on a fake web page to empty them too, and collect the personal data of the user from his profile or request them under the pretext of some kind of authentication.

Code Exploitation

In the world of cryptocurrencies, an exploit is often used to refer to a method of exploiting a flaw in a system to steal coins or tokens, resulting in the loss of the victim’s funds. Exploits can occur in many different ways, such as a software bug, an attack on a network, or even human error can lead to an exploit. There are several common types of exploits such as Instant Credit Attacks, 51% Attacks, and Laundering Trade.

While some exploits can be small and only result in the loss of a few coins, others can be much more devastating and result in the loss of millions of dollars of cryptocurrency.

Routing Attacks

This is a type of attack possible when third-party software is introduced into the work of the client provider. Experts around the world are monitoring the likelihood of such a hack. Although the nodes in the blockchain network are scattered around the world, different Internet providers communicate with each other which can affect the network. In routing attacks, the network is divided into several separate sectors, hacking communication paths between nodes.

An attacker blocks communication between nodes in a specific location on the network and thus creates two different blockchain networks from one. When the attack is completed, all blocks mined in the smaller chain are destroyed. Any transactions and income of miners and node owners are also discarded.

Stolen Keys

Many exchanges hold private keys for their users’ wallets. Such a system allows exchanges to block suspicious accounts or help users regain access when a password is lost. However, the disadvantage of storing digital money on such exchanges is that hackers can access the centralized storage of many wallets. 

Sybil Attacks

A Sybil attack is a type of attack on a decentralized network in which a hacker runs a computer node and creates many different identifiers based on it to distribute malicious data to honest nodes to gain control over the blockchain. Most often, manipulations come down to the theft of funds.

Just as one person can create multiple social media accounts, in a blockchain, a user can own multiple IDs that belong to different nodes. Outwardly, it is impossible to determine that there is one client behind them – they look unique.

Computer Hackings

Computer hacking refers to the act of exploiting vulnerabilities in a computer system to gain unauthorized access to data or to disrupt the system’s functionality. Hackers can use a variety of techniques to gain access, including social engineering, malware, and exploiting software vulnerabilities. The consequences of computer hacking can range from stolen personal data and financial loss to the complete shutdown of critical systems. As the use of technology continues to grow and become more integrated into our daily lives, the risk of computer hacking also increases. Individuals and organizations must take steps to protect their systems and data from these malicious attacks.

What is Blockchain Penetration Testing?

Blockchain penetration testing is a security assessment process conducted by ethical hackers or security professionals to test the reliability of a blockchain-based solution or application.

The main goal of blockchain penetration testing is to identify security vulnerabilities and loopholes, as well as identify misconfiguration errors in a solution. By performing blockchain penetration testing, organizations gain insight into the overall security posture of their blockchain, which enables them to address potential weaknesses in their blockchain-based solutions or applications.

Blockchain Security Tips and Best Practices

Blockchain is touted as one of the most secure technologies, which uses a high degree of data encryption, protecting them from unauthorized and unscrupulous changes. Nevertheless, security risks exist. They can be avoided by following the principles below.

Secure storage of cryptographic keys – Access to the blockchain is regulated by private cryptographic keys. Of course, they must be stored in a safe place and be kept secret. Saving them in plain text files or using them unencrypted on devices is a security risk, as attackers can gain access to the keys through spyware. Try to avoid it if you value your data.

Checking the quality of the blockchain network code – Blockchain code requires expert oversight, and the scalability of the network is also worth checking before trusting it with any information. Poor code creates threats that are easy to avoid if discovered in time.

Vendor credential verification – As more and more third-party solutions become available for storing funds in smart contracts and wallets, the risk of loss due to errors by such providers increases. Check the vendor’s reputation before opting for their blockchain solutions.

Web certification verification – Blockchain transactions will become much more secure if you always ensure that the security certification and the HTTPS protocol extension in the address bar are correct. This is a very useful habit to protect against phishing.

Conclusion

While blockchain technology offers unprecedented security features, it is not completely immune to cybersecurity threats. is critical for organizations and individuals to be aware of Blockchain cybersecurity challenges and implement robust security measures to mitigate them. Helenix has unique experience in developing blockchain security solutions, one of them being a secure implementation of a cryptocurrency wallet oriented towards server systems with a high number of user keys – HSM Wallet.

FAQ

While blockchain technology offers enhanced security, it is not completely immune to security issues. Potential blockchain security threats include cyberattacks, smart contract vulnerabilities, and human error.

There is no single blockchain that has the best security. The security of a blockchain network depends on various factors, including the consensus mechanism, network size, and cryptography used.

While blockchain technology is highly secure, it is not completely immune to hacking attempts. However, the decentralized and transparent nature of blockchain networks makes it more difficult for hackers to manipulate or alter data.

While blockchain security and cybersecurity share some similarities, they are not the same. Blockchain security refers specifically to the security of data stored on a blockchain network, while cybersecurity encompasses a broader range of security measures to protect against cyber threats, including phishing, malware, and hacking.

Blockchain Security Solutions

Innovation brings not only new opportunities, but also new threats. Keep your blockchain assets safe with centralized and automated protection of critical processes and private data.

Trusted Environment

Perform all critical operations in an isolated environment of hardware encryption modules certified according to the strictest data protection regulations.

Run dedicated operations or applications entirely within HSM boundaries that have unmatched levels of security proven time and time again in many different industries.

  • The hardware core of our solutions is the FIPS 140-2 Level 3 certified general purpose HSM
  • Private data are practically impossible to steal, copy or replace

Enhanced security

Safely create, store and utilize the private keys inside isolated highly secured hardware environment.

Сompliance

Сonfidence in both, efficient protection of your data and compliance with the rules of the payment industry.

Scalability

HSM architecture allows you to easily expand capacity of the solution without disrupting your business workflow.

Crypto Assets Control

You no longer need to choose between security and convenience, as our APIs and mobile apps allow you to have both anytime, anywhere.

Our solutions have been carefully designed to reliably protect your crypto assets. They easily integrate with existing IT architecture elements by utilizing API or can be installed on devices as the application.

Functionality

Supports different cryptocurrencies, transaction processing and address generation.

For the Ecosystem

Secure the most vulnerable elements of cryptocurency ecosystem – Online Wallets & Stocks.

Anywhere, anytime

Solutions are deployable via mobile app, make secure payments anywhere from any device.

Products

HSM Wallet API is a secure implementation of a cryptocurrency wallet oriented towards server systems with a high number of user keys.

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sed congue dapibus leo id auctor. Sed semper nisi odio, vel viverra nisl consequat et.

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sed congue dapibus leo id auctor. Sed semper nisi odio, vel viverra nisl consequat et.

Contact us

Do you have any further questions? Go ahead and send us your enquiry! Our team will get back to you as soon as possible.