Potential Risks for Blockchain and Ways to Prevent Them

Although blockchain technology prevents several types of malicious attacks and reduces many associated risks, it does not eliminate all of them. This evolving technology has the potential to lead to a shift in thinking about digital transactions in multiple sectors. However, it is still in its infancy, and its preventative mechanisms may impair its resistance to frauds and maliciousness.

The 51% Attack

A 51% attack may occur when a single miner node, which happens to have exceptionally more computational resources than the rest of the network nodes, dominates the verification and approval of transactions and controls the content of a blockchain. As it has 51% of the network’s processing power, the dominant node can manipulate the blockchain, insert transactions, double-spend funds, or even steal assets from others.

Sybil Attacks

A Sybil attack is arranged by assigning several identifiers to the same node. Blockchain networks have no trusted nodes, and every request is sent to many nodes. A successful Sybil attack against a blockchain would allow bad actors disproportionate control over the network. If these fake identities receive recognition from the network, they might be able to vote on behalf of various proposals or interrupt the flow of information across the network.

A Distributed Denial-of-Service (DDoS) Attack

This type of attack takes advantage of the specific capacity limits that apply to any network resources — such as the infrastructure that enables a company’s website. The DDoS attack will send multiple requests to the attacked web resource — to exceed the website’s capacity to handle multiple requests and prevent the website from functioning correctly. Typical targets for DDoS attacks include Internet shopping sites, online casinos, any business or organization that depends on providing online services.\

Double-Spend Attack

A double-spend attack occurs when a user makes a second transaction with the same data as a previous one that has already been validated on the network. Double-spending is a transaction that uses the same input as another transaction that has already been validated on the network. A double-spend attack isn’t possible with physical fiat money. Since there’s no centralized authority to control crypto transactions, users can replicate digital files easily and use them to make purchases. The holder makes a copy of the digital coin and uses it to make another transaction while keeping the original in a wallet.

Identity Theft

The security of assets depends on safeguarding the private key, a form of digital identity. If one’s private key is acquired or stolen, all the assets this person owns in the blockchain will vanish, and the thief is likely to stay unknown.

Illegal Activities

System Hacking

It is difficult to hack and alter records stored in a blockchain, but not the programming codes and systems that implement its technology. MtGox, once the largest Tokyo-based bitcoin exchange, was hacked in March 2014, and bitcoins worth $700 million were stolen. Poorly maintained and outdated codes allowed malefactors to double-spend.

Smart Contracts’ Vulnerabilities

Smart Contracts are the core element of Ethereum Blockchain. It’s very important to solve these problems, as Smart contracts play a crucial role in helping you exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middle party.

Smart Contracts security must be considered as any other application security. It might contain logical vulnerabilities, insecure design, and it might run on vulnerable components (ledgers).

Auditing Smart Contract third party evaluate the security risks of deploying protocols using smart contracts. To review and verify the project specifications and source code with a detailed focus on weaknesses, potential vulnerabilities, and overall security the procedure of findings with solutions that may mitigate future attacks or loopholes must be provided by auditors.

A smart contract audit involves security experts scrutinizing the source code created to underwrite the functions of the smart contract often called a decentralized protocol.

The importance of getting the smart contract code correct and secure before it is deployed is very important even more due to the immutability of blockchain and distributed ledger system. The implications of activating a smart contract that has not been properly audited could be severe for any project.

The objectives in a smart contract audit include:

  • Evaluate the reliability of data from a smart contract that has an impact on financial statements.
  • Evaluate the effectiveness of Smart contract governance controls to ensure the distributed systems are functioning as intended.
  • Ascertain compliance with applicable laws, policies, and existing standards.

The contribution helps to the emerging literature on audit data analytics (ADA) by proposing a new approach involving audit methodology, audit analytic tools, and smart audit procedures which are enabled by blockchain technology. Besides, this contribution presents a discussion regarding the effect of smart audit procedures on audit quality and the public/private interest regarding the role of emerging technologies in the traditional system audit process bring by a new emerging cybersecurity market.

The Importance of the Standard Library

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