Blockchain technology is rapidly growing, attracting many newcomers who may lack prior experience or security knowledge. This awareness gap creates opportunities for attackers. To help you navigate this complex landscape, we break down blockchain security into two main areas: key terminology and common attack methods.
Core Concepts in Blockchain Security
Understanding Wallets
A wallet is a tool for managing private keys. It comes in various forms but typically includes a software client that allows users to check, store, and trade digital assets. As the primary gateway to blockchain, securing your wallet is paramount.
Cold Wallets
Cold wallets operate offline, storing digital assets without an internet connection. Users generate addresses and private keys on an offline device, safeguarding them from online threats. While highly secure, cold wallets aren't foolproof. Insecure random number generation can compromise them, and physical damage or loss may lead to asset depletion. Always back up your keys securely.
Hot Wallets
Hot wallets require an internet connection, offering convenience for frequent transactions. However, being online makes them vulnerable. Phishing attacks, malware, or device compromises can expose wallet files or passwords. When using centralized exchanges or wallets, set unique passwords across platforms and enable two-factor authentication (2FA) for enhanced security.
Keys and Authentication
Public Key
A public key is derived from a private key and forms a cryptographic pair. It generates a wallet address and serves as proof of ownership. Crucially, you cannot reverse-engineer a private key from a public key.
Private Key
This randomly generated string of data controls access to blockchain assets. It computes the public key and, subsequently, the wallet address. As the ultimate authority over your assets, the private key demands rigorous protection. Unlike traditional username-password systems, key-pair transactions offer superior security and integrity, minimizing risks of interception or manipulation.
Mnemonic Phrases
To simplify remembering long, complex private keys, mnemonic phrases convert them into 12–24 common English words. These phrases are interchangeable with private keys, effectively acting as the key itself. Store them offline on physical media to prevent digital theft. They complement Keystore files as a backup method.
Keystore
Common in Ethereum wallets, Keystore encrypts private keys with a wallet password, stored as text or JSON. Decrypting it requires the password, adding a security layer. If hackers obtain your Keystore, they might brute-force the password. Use strong, unique passwords with special characters and at least eight characters.
Blockchain wallets excel in theft and loss prevention. While theft causes vary, asset loss often stems from inadequate backups, lost backups, forgotten passwords, or device failure. Always backup private keys, mnemonics, and Keystore files multiple times to mitigate risks.
Follow these "Ten No-Principles" for wallet security:
- Do not use wallets without backups.
- Avoid emailing or storing private keys digitally.
- Refrain from using cloud backups, screenshots, or photos for keys.
- Never share keys via messaging apps or with others.
- Avoid unknown wallet apps or third-party Apple IDs.
- Do not import keys into unverified websites.
Blockchain Fundamentals
Public Blockchain
Public blockchains allow anyone to read, send transactions, and participate in consensus. They are fully decentralized, with transparent, immutable data. Token mechanisms often incentivize participants to maintain security.
Exchanges
Digital asset exchanges facilitate trading. They fall into two categories:
Decentralized Exchanges (DEXs): Transactions occur directly on-chain, with assets held in user wallets or smart contracts. This minimizes exchange-held funds, enhancing security and privacy. Examples include dYdX and Bancor.
Centralized Exchanges (CEXs): Users register and complete KYC verification. Trades may update internal databases rather than occurring on-chain, with assets reconciled during withdrawals. Major examples are Binance and OKEx.
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Nodes
In blockchain's decentralized network, nodes are individual computers storing data. Full nodes retain the entire blockchain, while light nodes store only relevant data. This distribution ensures network resilience even if some nodes fail.
RPC
Remote Procedure Call (RPC) interfaces allow nodes to interact with external systems. Ethereum's RPC, via ports like 8545, enables JSON-RPC calls for Web3 commands, supplying data to wallets like MetaMask.
ETH Black Valentine's Day
In 2018, attackers exploited Ethereum RPC authentication flaws, calling eth_sendTransaction to steal tokens over two years. The impact exceeded $20 million in ETH alone, plus numerous other tokens.
Consensus Mechanisms
Consensus algorithms ensure agreement among distributed nodes. They are vital for reliability amidst node failures or malicious actions. In blockchain, they enforce protocol rules and transaction integrity.
Proof of Work (PoW): Used by Bitcoin and Ethereum, PoW requires nodes to solve computational puzzles. miners compete to add blocks, consuming significant energy but ensuring security through work.
Proof of Stake (PoS): Validators stake tokens to verify transactions. It's energy-efficient, leveraging economic incentives to prevent fraud. Validators risk losing stakes for malicious behavior.
Delegated Proof of Stake (DPoS): Token holders vote for delegates who validate transactions. While efficient, it faces criticism for centralization tendencies.
Multi-Signature (Multi-Sig)
Multi-sig requires multiple signatures to authorize transactions, enhancing security. Lost keys won't compromise assets, as several parties must approve actions.
Forks
Soft Fork: A backward-compatible upgrade where non-upgraded nodes still operate on the chain.
Hard Fork: A permanent split creating two incompatible chains, often due to protocol changes.
Smart Contracts
Self-executing contracts with terms written into code. They automate processes on the blockchain, running exactly as programmed without intermediaries.
Common Blockchain Attacks and Mitigation
1. Cryptojacking
Attackers hijack devices to mine cryptocurrency without consent. They infect systems via phishing or malicious scripts.
Prevention:
- Monitor device performance and CPU usage.
- Install browser extensions like MinerBlock.
- Avoid suspicious email attachments.
- Keep software updated and use antivirus tools.
2. Nothing at Stake Attack
In PoS systems, validators might support multiple forks without cost, disrupting consensus. Solutions include slashing penalties or DPoS delegation.
3. Double Spend Attack
Spending the same funds twice. Methods include:
Race Attack: Prioritizing high-fee transactions to reverse payments.
Finney Attack: Withholding blocks to enable double spends against zero-confirmation merchants.
Vector76 Attack: Combining Finney and Race attacks against one-confirmation transactions.
51% Attack: Controlling majority network hash rate to rewrite transaction history.
4. Alien Attack
Polluting node pools by exploiting compatible handshake protocols, causing network congestion. Maintain network health monitoring.
5. Phishing
Deceptive attempts to steal credentials via emails or fake sites. Stay vigilant: avoid entering keys on linked sites, use hardware wallets, and enable 2FA.
6. Trojan Horse Attack
Malware hidden in legitimate programs steals data or enables remote control. Crypto-themed trojans, like mining malware, are prevalent. Use security software and avoid untrusted downloads.
7. Supply Chain Attack
Compromising software dependencies. Review all third-party code for suspicious elements and monitor network requests.
8. Roll Back Attack
Reverting transactions to alter outcomes. Common in gaming smart contracts. Avoid inline transactions for betting and drawing.
9. Transaction Congestion Attack
Overloading EOS networks with defer transactions to manipulate results. Avoid defer for critical operations dependent on block data.
10. Random Number Attack
Predicting poorly generated random numbers in smart contracts. Use secure off-chain oracles for randomness.
11. Hard_Fail Attack
Exploiting EOS transaction states to fake deposits. Validate交易状态 as executed.
12. Replay Attack
Reusing signed messages. Include variables like nonces or timestamps in signed data to prevent reuse.
13. Reentrancy Attack
Repeatedly calling withdraw functions before balances update. Follow checks-effects-interactions patterns: update state before transferring funds.
14. False Top-Up Attack
Faking deposits with invalid tokens or failed transactions. Verify token contracts and transaction statuses.
15. Short Address Attack
Exploiting EVM padding to inflate transfer values. Validate address lengths meticulously.
16. Fake Token Attack
Creating counterfeit tokens resembling real ones. Check contract addresses and token identifiers strictly.
17. Integer Overflow Attack
Manipulating data boundaries to create excessive balances. Use safe math libraries for arithmetic operations.
18. Race Condition Attack
Competing to alter conditions before state updates. Design contracts to handle concurrent executions safely.
19. Exceed Authority Access Attack
Executing privileged functions without authorization. Implement role-based access controls and function visibility restrictions.
20. Transaction-Ordering Dependence
Miners influencing transaction sequences for gain. Assume unknown orderings and design accordingly.
21. Sybil Attack
Overwhelming nodes with fake identities. Limit connections per IP and monitor network activity.
22. Fake Onerror Notification Attack
Spoofing EOS system notifications. Verify error sources as eosio account.
23. Dusting Attack
Tracing small transactions to de-anonymize wallets. Ignore or donate dust UTXOs; use larger inputs for privacy.
24. C2 Attack
Using blockchain for persistent command control. Regularly audit smart contracts for suspicious payloads.
25. Money Laundering
Obfuscating illicit fund origins via mixers or anonymity coins. Exchanges should enhance KYC and monitor large transactions.
26. Ransom
Extorting cryptocurrency via encrypted files. Never pay ransoms; seek professional assistance instead.
Frequently Asked Questions
What is the safest type of wallet?
Cold wallets are generally safest as they operate offline, isolating private keys from internet threats. However, combine them with secure backups for optimal protection.
How can I detect a phishing attempt?
Check for suspicious sender addresses, grammatical errors, and urgent requests for keys. Always navigate to sites directly instead of clicking links.
Why is blockchain considered secure?
Decentralization, cryptographic hashing, and consensus mechanisms make altering data extremely difficult. Each block links to the previous, creating an immutable chain.
What should I do if my private key is compromised?
Immediately transfer assets to a new wallet with a new key. Old keys cannot be secured once exposed.
Are smart contracts irreversible?
Yes, once deployed, they execute as coded. Any bugs or vulnerabilities are permanent unless upgrade mechanisms are built-in.
How do I choose a reliable exchange?
Opt for platforms with strong security histories, 2FA, cold storage reserves, and regulatory compliance. Research past incidents and user reviews.
Conclusion
Blockchain offers robust security but requires vigilant practices. Understanding key terms and attack vectors empowers you to safeguard assets. Always prioritize secure storage, skeptical browsing, and continuous learning.