Blockchain: Making the Reward Much Greater Than the Risk

March 5, 2019
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5 min read

What is the first thought that comes to mind when someone mentions blockchain? Many of you may say bitcoin, which is what’s to be expected considering bitcoin was the first major cryptocurrency that made blockchain a household name. However, bitcoin is only one among a large variety of cryptocurrencies, and while it was the first large-scale implementation of blockchain technology, it is merely one application of many uses by which blockchain can aid society and commerce.

Blockchain technology provides a means to store data in a distributed ledger. The data is stored within a block, where it is digitally recorded and linked together with other blocks, forming a chain. The chain provides the entire history of all recorded data. Data is committed to the chain in the form of transactions. The transactions are only added after they have been validated by the blockchain network’s consensus protocol, so that there is only one version of the truth. Any data stored on the blockchain is “immutable,” meaning it cannot be changed. Also, all network participants have a copy of the data, meaning everything is transparent and everyone has the same version of truth.

The first major implementation of blockchain technology was introduced in 2008 with the release of bitcoin, but it’s only during the past few years that enterprises have come to grasp the technology’s potential. This is happening because the past decade has seen a tremendous reduction in the costs of secure storage, computation power and communications. As a result, more innovation makes its way into mainstream markets, served to average consumers.

The same applies to the business realm. Nowadays, we are starting to see more blockchain adoption across many industries, including financial, food services, healthcare, aviation, automotive and logistics. In 2017, the blockchain market was valued at $708 million. Two separate reports have estimated that by 2024–2025, the market could be valued between $20 to $60 billion. This significant growth represents up to an 8,300 percent increase in the span of less than 10 years.

We are still in the early stages of exploring this technology, and it will take time to fully realize its applications and potential. For example, it took almost 10 years for computers to reach an adoption rate of 80 percent. For enterprises, blockchain technology at scale has only been around since late 2015. So what does this mean, exactly? As we watch a new technology emerge and steadily grow, people who love to be on the cutting edge of technology are excited about the endless possibilities blockchain affords. That said, with new technology also comes new challenges, especially regarding security.

Big Implementations, Limited Experts

The people who deeply understand blockchain infrastructure are typically blockchain developers and architects, whose numbers are increasing, but are still few and far between. If you layer on blockchain security expertise, you will find that number to be even smaller. Hardly any published information or guidance exists about blockchain security.

So what are the implications of developing these full-fledged solutions with little knowledge about the potential attack vectors and risks that could bring the entire system crashing down? Inherently, the decentralized nature of blockchain, coupled with consensus protocols, helps to address some security needs, but the consequences can be dire if security isn’t fully explored.

Blockchain Is Code, and Code Can Be Flawed

As previously mentioned, at its core, the blockchain concept is simple: It is a distributed, immutable, cryptographically assured ledger that can have applications, often called “smart contracts,” interface with it.

A smart contract is made up of numerous lines of code, which are stored within the blockchain. These contracts automatically execute when predetermined terms and conditions are met. They are small programs that replicate processes or business logic and can be used to enforce an agreement between multiple parties in such a way that they can be certain of the outcome without any need for an intermediary.

For example, smart contracts may be used in the healthcare industry. Users’ data, such as blood pressure and other metrics, could be published to a chain, and once a metric rises above a specified threshold, the smart contract could execute actions such as notifying the user and/or processes such as further consultations with specialists to resolve their health problems. A flaw capable of compromising smart contracts could allow an attacker to modify critical details in the code. In the above example, what happens if an attacker is able to affect the business logic or introduce additional code to perform unintended actions?

But as with many powerful technologies, while blockchain is straightforward in concept, if improperly implemented, flaws and vulnerabilities can result in risk and security consequences. Think about what would happen if one could change the smart contract’s data before it is stored on the chain? Data on the chain is supposed to be trusted, right? What about a smart contract flaw that results in business logic not behaving as expected?

In the past few years, X-Force Red has seen a plethora of risks introduced into blockchain ecosystems where it was possible to abuse access controls at the user and administrative levels. For example, some vulnerabilities may enable attackers to inject malicious code into the network, effectively compromising all nodes.

Putting the technology aside, your standard everyday applications (i.e., web/mobile applications) still need to interface with the chain on some level. It has been possible for our penetration testers to compromise these components and pivot to backend systems where there is little to no security, giving an attacker the ability to insert data on the chain or execute any function that is exposed. Functions may include higher-privileged administrative access or accessing data that a user should not have access to. If that happens, how does an environment protect itself against malicious actions?

Raising the Bar on Blockchain Security

Security is about raising the bar high enough that attackers would be extremely hard-pressed to exploit any vulnerability. If they were to attack, they would make enough noise on the network to be detected and incident response procedures would hopefully slam the door shut. So, monitoring from both an application and network level is key to protecting blockchain implementations. Should an internal host be scanning your internal network? I think not!

Another precaution is to take a page out of the renowned television show, “The X-Files,” and trust no one:

  • Build a layered defense where each layer of the solution provides some level of distrust of all the layers above it.
  • Enforce strict access controls both at the application and blockchain layers to prevent overly permissive access and abuse.
  • Ensure there are strong governance controls and processes around the handling of all sensitive information, including key material. Should your certificate authority be disclosed to an unauthorized third party, then it’s game over; they would have full control of your blockchain environment.
  • Implement strong change control and a secure code review process to ensure all configuration settings and source code (i.e., smart contracts) are as secure as possible and do not contain any weaknesses that can be abused.

These are only a handful of basic actions that you can take to help protect the integrity, availability and confidentiality of your blockchain-enabled environment.

At X-Force Red, we have many experienced hackers with blockchain-specific skill sets to perform security assessments and penetration tests on anything within the blockchain technology and connected infrastructure.

IBM is an industry leader in blockchain technology and, as such, our X-Force Red hackers are exposed to numerous areas of the technology while working with leading experts in the field.

This all culminates into possessing a deep technical understanding and the ability to assess any blockchain-enabled solution from an end-to-end perspective. X-Force Red can review the environment from a design/architectural perspective and manually review smart contracts, access controls, configuration of critical components and more. We can also test all applications and technologies that interface with the blockchain, work with key stakeholders and developers to fully realize the potential risks they may face, and assist in reducing the risk of a compromise.

Learn more about X-Force Red’s blockchain testing services


Christopher Thomas
Senior Managing Consultant – IBM X-Force Red
Christopher Thomas is a contributor for SecurityIntelligence.
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