Blockchain security for your business

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The rapid evolution of blockchain and distributed ledger technology has led many companies to investigate use cases in line with their respective industries. In exploring enterprise blockchain solutions, businesses face the crucial task of determining the underlying network structure that best suits their needs. This undertaking requires key decision makers to become familiar with tech nuances - especially if successful implementation and project optimization are priorities.

So what exactly do businesses need to consider when exploring blockchain solutions? For many, the first consideration is whether to pursue a public or private framework. Public blockchains are just that, accessible and readable to anyone - an entirely open peer-to-peer network. Conversely, a private blockchain restricts network access to approved participants. While corporate security concerns tend to encourage private blockchain use, a comprehensive assessment is essential to selecting the appropriate network type.

Validation incentives

Both public and private blockchains require network validators to function properly. When a transaction (or transfer of data) occurs on either network, validators are involved in determining the legitimacy of the action. Each blockchain type uses a system of nodes to maintain a decentralized, shared data structure. The primary difference between the validation technique on each network is the inclusion of an incentivization mechanism.

On public blockchains, validators receive rewards for their participation in the form of cryptocurrency. For example, Bitcoin, Ethereum, and Litecoin blockchains are high profile iterations of the Proof of Work (PoW) consensus or incentive mechanism. In contrast, private blockchains do not require an incentive to function. Instead, a system is only as decentralized as its most centralized centralized component. Here, using private blockchains is inherently centralized and therefore has a single point of failure and is much more hackable. 

When considering the security implications of both options, public blockchains require further inquiry. Because anyone can join a public blockchain, participants with malicious intent can gain majority control over the networks consensus protocol - undermining immutability. While these 51% or majority attacks are a considerable threat, there are emerging lines of defense that aim to lessen their occurrence and impact. 

Nonetheless, the private blockchain ecosystem currently provides greater protection from this threat due to users having been fully vetted beforehand.

Image Credit: Shutterstock

Image Credit: Shutterstock (Image credit: Shutterstock)

Privacy or transparency

Along with immutability, transparency is a defining characteristic of blockchain technology. On a public blockchain, all transactions are exposed - viewable by anyone at any time. It is an entirely open source system. While transferred data is transparent in this ecosystem, the identity of participants may remain anonymous. After all, there is no obligation to reveal your identity on a public blockchain - privacy and anonymity are protected.

This pseudonymous structure is inverse to the relationship between identity and data on a private blockchain. In this environment, transactions are inherently private, but the identity of all nodes is made transparent. This transparency is crucial for companies that need to know who they’re dealing with - without question.

There are definite advantages to using a private blockchain where participants are vetted before joining the network. Traditional Know Your Customer (KYC), and Anti-Money Laundering (AML) verification techniques can be employed to facilitate this process. Public blockchains cannot unequivocally confirm a network participants identity unless the participant chooses to reveal it.

Hybrid solutions

For some companies, neither public nor private blockchains may be the answer. In these instances, a consortium blockchain may be an appropriate alternative.

But what is this exactly is it? Simply put, a consortium blockchain is a partially private blockchain. Instead of a single company overseeing the blockchain, a group of companies, governments or otherwise come together to form a network.

Within this network, individual members are pre-selected as the validators. This structure allows for higher data privacy and security while avoiding the creation of a singularly controlled blockchain - which many see as counterintuitive to blockchains intended purpose.

In addition to consortium blockchains, zero-knowledge proofs have evolved to offer greater privacy on public blockchains. These high-level cryptographic proofs allow validators to prove something exists without knowing what it is. However, due to their processing complexity, zero-knowledge proofs sacrifice speed for data privacy.

In addition to these chain-focused solutions, many third-party developers have begun to explore on and off-chain applications that interact with the public blockchain ecosystem. While many are in their infancy, these applications are well positioned to leverage the benefits of both public and private blockchain networks - the more distributed the data that is encrypted, the harder it is to hack into the system. This security feature is unique to a decentralized ledger - where it’s much harder to achieve with any one or a group of trusted parties. 

Image Credit: Pixabay

Image Credit: Pixabay (Image credit: Image Credit: The Digital Artist / Pixabay)

Future of blockchain security

As blockchain solutions continue to evolve, companies must remain knowledgeable in current blockchain developments, in order  to extract maximum value from their blockchain initiatives. In a space known for rapid development, the opportunities to create value utilizing blockchain continue to grow. While traditional public blockchains initially appear inappropriate for enterprise implementation, further exploration reveals additional considerations. For instance, increasingly complex cryptography continues to blunt the potential for a 51% attack, while also increasing transaction privacy. 

Further to this, ongoing third-party development continues to introduce both on and off-chain solutions that maintain interoperability with native blockchain platforms. Future solutions must leverage the best of private and public blockchain platforms to achieve high levels of corporate and mainstream adoption. Finding the right balance between efficiency, transparency, and security will continue to drive the development of enterprise blockchain solutions.

Matt Luongo, Project Lead at Keep Network

Matt Luongo
Matt Luongo is the Project Lead of Keep Network.