What are the Main Security Gaps in Blockhain?

Software development with high security and performance is the end result you want. In fact, several types of data, particularly sensitive and private details, as well as some classified data, are frequently used and affected in innovative apps. Safe data storage is crucial for blockchain-based apps and transactions, and the fundamental idea behind this kind of technology. Most people think that blockchain is completely safe and particularly difficult to hack. Let’s find out about blockchain security issues and how to fight them.

Briefly about Blockchain Security

The views on blockchain security are correct, but there are still security flaws. To understand the topic deeply, we need to first analyze blockchain network technology.

In simple words, blockchain is a chain structure composed of data blocks that act as the primary data protection solution. This technology is mostly used for secure data transmission. As a result, rather than continuous data streamlining, it is split into numerous nodes with a closed environment. When the preceding block becomes "full," the system shuts it and initiates a new one. Furthermore, the block is added to the chain only after the validation of previous nodes or blockchain participants. If the potential node's credentials differ or are inaccurate, it may be denied. As a result, such data flow becomes difficult to detect or infiltrate.

Also, as a data protection solution, blockchain has a hashing algorithm. The algorithm works using cryptographic techniques.  This is the reason for the cryptocurrency term. Nonetheless, despite the general security precautions integrated into the blockchain, 100% security is still impossible. The overall safety risk is based on a variety of factors, such as the type of blockchain used. And blockchain isn't just about cryptocurrencies. However, digital currencies are the most common usage so we'll focus on them.

Custodial Vs Non-Custodial Wallets

Key access is the first and most typical security weakness. Blockchain-based apps and structures, like any other system that relies on credentials and profile characteristics, have an access management point where users must verify their personalities. Often, login and password, or access key are used for signing in. Keys for wallets have two distinctive access levels: custodial and non-custodial.

The custodial method means you have to set up your own wallet on a specific blockchain network. There, you will be assigned an account with a unique username and password. The main disadvantage of this strategy is that the platform's owners hold the private key for all transactions. As you can imagine the assets are out of your control.

If the network is unreliable, you might end up losing your digital assets. As a matter of fact, even if the platform is reputable, it will not guarantee money safety. Such marketplaces are infamous for hackers and thieves attacks.

For example, according to several reports, bad actors stole crypto assets worth more than $2 billion in 2022. Their primary targets were public storage facilities. As you see, creating a custodial wallet needs careful consideration.

You may also create your own non-custodial wallet, which is much safer. The major difference between the two wallets is that the non-custodial wallet's creator is also its owner and the person with all access to credentials. Additionally, since these ledgers are mostly independent and personal, even if one is attacked, the others will be safe. But then again, building a blockchain and managing such a solution generally requires deep skills and knowledge. The picture below compares wallets based on access, recovery of funds, security, etc.

To be honest, the only difference in security vulnerability and policies of blockchain is key access. Other blockchain security vulnerabilities are universal to all software development.

Other Blockchain Security Issues

In fact, blockchain solutions are one of the most secure software technologies right now. OWASP list issues are not relevant for apps on blockchain or smart contracts. The biggest security threats are quite particular and may mostly be applied in P2P or similar transactions. Furthermore, some of them were made solely for the blockchain.

Sybil Cyber Attack or Proof of Stake (PoS)

The Sybil attack is about getting control over the network by influencing the majority of authority. If someone controls more than 51% of the transactions in the network, they get to decide whether the transaction is validated or not.

In short, the key feature of blockchain, the prior data block confirmation, becomes the main vulnerability.

There are, fortunately, ways to prevent such security risks. Well-known blockchains like Ethereum or PolkaDot is the best option for avoiding such attacks. Controlling the majority of nodes is more difficult, if not impossible, with popular public blockchains. Could you imagine how many nodes we have to hack?

51% Attack or Proof of Work

The 51% attack has a few application scenarios that have the same security risk. The goal of PoS is to imitate numerous anonymous accounts and impersonate the participants in the transaction validation process. Holding the majority of votes can have a direct influence on many transaction-related procedures.

The Proof of Work operates on a similar idea. The main difference is that PoS calculates stakeholders or individuals who own and stake crypto assets. Meanwhile, Proof of Work is directed at cryptocurrency exchanges, where miners are involved. However, this is the only notable difference.

The development of blockchain technology and cryptography techniques helped establish security mechanisms. Each blockchain is built on a specific "proof mechanism": PoW for the Bitcoin and PoS is used for Ethereum. That's why it is impossible to influence an ETH transaction by imitating proof of work, and targeting BTC with PoS won't have an effect.

Endpoint Weakness

Even so, while blockchain is a very secure and anonymous network, no single hashing algorithm can ensure full obscurity. The user can still be traced back to the IP address or even the gadget. Instead of challenging the blockchain, the hacker might get access to cryptocurrency by hacking your smartphone.

Remembering your private keys or passwords is the greatest strategy ever. Also, you can keep your cryptocurrencies on devices known as cold wallets.

Phishing

The phishing attack is another example of blockchain security issues that is a usual problem for any software. In fact, it is probably one of the most widespread web dangers. The core idea is that the intended user would click on a fake hyperlink and download malware. Getting personal information such as usernames, passwords, and keywords means easy access to blockchain for hackers.

Phishing is a security vulnerability not directly related to the blockchain. If you don’t store any passwords, credentials, and keys on devices and don’t click on suspicious links, you’ll be safe. The best data protection solution is to know the risks and prevent them before any attack happens.

Sum Up

Blockchain is now one of the most secure technologies, yet it cannot provide ultimate data protection solutions. So, it is critical to spot potential threats and understand how to deal with them. The amount and quality of most blockchain attacks are quite limited. The most widespread blockchain security vulnerabilities are old-school hacking techniques such as phishing or credential theft. Remember that every solution that uses blockchain, like wallets, smart contracts, and applications require at minimum research and at maximum experienced software development company.