Mitigating attacks on blockchain

In past few years, implementation of blockchain technology has attracted considerable attention. It efficiently records cryptographic transactions in a public ledger, thus making it difficult to alter and compromise because of the distributed consensus. As a result, blockchain is believed to resist fraud and hacking.

Blockchain technology enforces distributed consensus and cryptographic transactions, thereby rendering it difficult to compromise the integrity of its records without being noticed by an entire network. Because of blockchain’s ability to facilitate decentralized, trustless, encrypted transactions, and events to be recorded and stored publicly, optimists believe it can prevent online frauds such as double spending and hacking.

Blockchain technology: unavoidable attacks

Maliciousness on the Internet encompasses identity theft, fraud, and network or system intrusions. Blockchain can help in preventing frauds involving assets other than currency and credit. Moreover, it facilitates the development of smart contracts that can be used to ensure transacting parties comply with contracts, reducing defaults by buyers or poor service by providers. Although blockchain technology can prevent several types of malicious attacks and reduce many associated risks, it cannot eliminate all attacks. Such unavoidable attacks include:

The 51% Attack

A 51% attack can occur when a single minor node that is having more computational resources than the rest of the network nodes. In such a situation, this node dominates the verification and approval of transactions and controls the content of a blockchain. As it possesses more than half (51%) of the network’s processing power, the dominant node can outpace all other nodes. Thus, it can manipulate the blockchain, insert fraudulent transactions, double-spend funds, or even steal an asset from others.

Identity Theft

Although blockchain can preserve anonymity and privacy, the security of assets depends on safety of the private key, a form of digital identity. If one’s private key is acquired or stolen, no third party can recover it.

Illegal Activities

Blockchain technology can become a venue for illegality. Crypto-currency that uses blockchain technology may also facilitate money laundering.

Blockchain technology: ways to mitigate attacks

The attacks on blockchain mentioned above, can be mitigated. The following recommendations identify ways to enhance the robustness, anti-fraud, and anti-hacking capabilities of blockchain technology.

Using Detection Technologies

Although blockchain technology prevents fraudulent behavior, it is not able to detect fraud by itself. Blockchain developers must focus on strengthening this technology by implementing innovative techniques and methods that are needed to detect attacks. They can use machine learning and data-mining algorithms for creating new applications for detecting fraud and intrusions in blockchain-based transactions. By implementing techniques such as profiling, monitoring, and detecting behavioral patterns based on people’s transaction histories, researchers can develop supervised machine learning approaches that can help in detecting outlier behaviors.

Establishing Identity in Blockchain Technology

Use of cryptographic keys and anonymous transactions can make the blockchain vulnerable to account takeover and digital identity theft. Loss of a key is equal to the loss of identity on the network. One solution is building an identity and reputation system using a blockchain that can record “fingerprint” events. This can also track life events such as the opening of bank accounts, car purchases, etc. These events recorded in the irreversible identity can become a digital identity that is difficult to steal because it is unforgeable, publicly monitored, and time-stamped.

Even if blockchain technology becomes sufficiently robust to prevent malicious activities and fraudulent attacks, any mechanism and protection inherent in the technology won’t work unless it is widely accepted and adopted by the majority of the industry.