How Blockchain Security Works – Problems and Solutions

FREE Online Courses: Enroll Now, Thank us Later!

In advanced times like today where everyone is equipped with technology, the security of our data has become a key concern. And especially when we are talking about an open network, point to point, distributed ledger system like blockchain, security becomes a topmost priority. So, in this tutorial, we are going to learn about what’s under the hood when it comes to blockchain’s security. Here, we will understand both the theoretical and practical aspects of it. 

Understanding Blockchain’s security

Blockchain is now a popular technology whose efficiency and potential are getting accepted and acknowledged worldwide. Up until now, we have been using blockchain mainly in cryptocurrency systems, smart contracts, and techniques related to the Internet of Things. However, with some already running and established systems like these, new domains like academics, finance, banking, industries are showing interest in shifting their processes on a blockchain-based system in the near future. 

With increasing demand and curiosity around blockchain, it becomes ever so important to have in-depth knowledge about how a blockchain system takes care of its security aspects. Security and privacy of blockchain become the most important part of its functioning because there is no point in adapting to a point-to-point network if it is not secure. Therefore, understanding the basics of security such as security concerns and properties will help us. It is of great help especially when you are part of a blockchain network or have taken up blockchain as a technology for your field. 

The reason why security and privacy of a blockchain network are so important is to keep the data in the ledger safe from theft and forgery. Blockchain claims to be the most secure, immutable and incorruptible network, but is it really so? And if yes, how does it manage that?

The goal of a good security system for blockchain is to protect the important data from falling into wrong hands and to maintain trust within the network. Blockchain uses cryptography and hashing techniques to make sure it provides a 100% secure environment to its users. In the following sections, we will see how blockchain ensures a threat-free legitimate transaction network. 

Security attributes of Blockchain 

In order to understand the concept of security of blockchain, we need to know the key security attributes of a blockchain network. That is, what are the main focus points to make sure that a blockchain network is secure. So, let us go through these points one by one. 

1. Integrity of transactions: Whenever there is a transaction taking place between two nodes in the blockchain, it’s contents must be safe. No one should be able to access or change the contents of a transaction in the middle of the transition. That is, the integrity of the transaction should remain intact.

2. Tamper-resistance: Blockchain must be tamper-resistance. Meaning, no one should be able to tamper both the objects within an active transaction or the historic data already stored in the blockchain blocks. This is made sure by the methods like SHA-256 hashing algorithm, Public-key cryptography, and Digital signature

3. Consistency: Blockchain should achieve the consistency of its ledger. By this, it means that the blockchain record should get updated at the same time on all the nodes. As we know, a blockchain network consists of a lot of nodes. Therefore, in a distributed network like blockchain whenever a new block is added all the nodes should get instantly updated. This timely updating of blocks or records throughout the network is called consistency. 

4. Access to network and data: Another important security aspect in the blockchain is for the users to be able to access data that is on the blockchain. And, also to have a properly running network system always. A user or node in blockchain must get access to view the records saved on the ledger whenever they wish to. 

5. Confidentiality of transactions: The whole point of having a robust security system in place for blockchain is to carry out point to point transactions without any third parties acting as intermediaries. So, the security of the content of these transactions becomes a topmost priority. Therefore, blockchain needs to maintain the confidentiality of such transactions. 

6. Anonymity of the user: In a blockchain network it is not necessary for the users to know each other personally or reveal their real identity in order to participate in the network. A node or user can easily carry out transactions using the public address assigned to them. Blockchain users can keep their identity anonymous and still be a part of the network safely. Also, it is important to note that a user can have multiple pseudonymous addresses to ensure unlinkability and prevent attacks.  

7. Resistance to attacks: A blockchain network is susceptible to different kinds of attacks such as DDoS (Distributed Denial of Service) attacks, Double Spending attacks, and Majority (51%) Consensus attacks. A security system must be so designed that it can protect the ledger contents and transactions from such malicious attacks and forgery. 

Major security concerns for blockchain

While opting or even designing a security solution for blockchain, there are four main security concerns that are kept in mind. If a security solution addresses all of these four corners then it is said to be perfect for blockchain. Let us discuss the four key security concerns for blockchain in detail. 

1. Confidentiality

The basic idea behind using a blockchain network is to be able to share information or important content between trusted users. In this scenario, the confidentiality of the content that we are exchanging becomes very important. Suppose Raj is a node on the blockchain network and so is Shalini. Raj wants to share his bank details with Shalini. Raj will expect that the blockchain network is so secure that no one from the network should be able to access and tamper with this information in the middle of exchanging.

If the security system of blockchain is not good enough, any third node from the network, says Rahul will access the information. Rahul will then know Raj’s bank details and may even change the details and send it further to Shalini. Prevention from such scenarios to maintain the confidentiality of the data is a crucial security concern. 

2. Integrity

Associated with confidentiality is another crucial security concern i.e. integrity of the data. By maintaining the integrity of data we mean that it should not change in the way. The data sent by one user should reach in the exact same state to the receiver. If a third party interferes in the middle and changes some parts of the information then its integrity is lost. To make sure that the integrity of the content being exchanged is retained, the proper security protocol is needed. 

3. Non-repudiation 

By non-repudiation, we mean the inability to deny or take accountability for a transaction. This becomes an important security concern when someone denies sending a piece of information to another node. Or someone denies receiving any. This is a problem of unaccountability which we will not like to happen in a peer to peer network like blockchain.

The security procedures should also address the issue of non-repudiation. It is done by providing a proofing method for the transaction where both the sender and receiver have a proof of the transaction. 

4. Authentication 

Another important security concern in the blockchain is the authentication of the users. Blockchain is a widespread network with a lot of users as participants. What can happen in such a case is that users can forge their identities to do fraud. To prevent this from happening, proper authentication of a user is necessary.

Cryptographic techniques like digital signatures make sure that no user can fake their identity to others. Only the authentic and authorized nodes can take part in transacting within a blockchain network. 

Hashing and 0ther security concepts in blockchain 

Now, we come to the most important part of blockchain security; Hashing. Hashing is a mathematical process of converting a value of a certain (not fixed) length into a hash value of fixed length. In other words, blockchain uses different types of hashing algorithms to convert input data into a hashed output of fixed length. This hashed output is a unique alphanumeric string. 

The process of hashing involves special hashing algorithms/ hash functions that convert our transaction data into a hash value. It is important to note here that hashing and encryption are two different processes. However, both hashing and encryption convert readable data into unreadable text. But, encryption can be reversible i.e. we can decrypt the encrypted values. On the other hand, we cannot redo a hashed value, it is only a one way, non-reversible mathematical operation. 

1. Hashing: SHA-256 Algorithm

Hashing is a cryptographic process which we use to secure our data in a blockchain network. There are different types of hash functions that are commonly in use, such as, MD5, SHA1, and SHA256. Blockchain commonly uses SHA-256 (Secure Hash Algorithm) for hashing the transactions. The 256 in SHA-256 stands for the size of output that this function gives i.e. 256 bits. The input value may contain any element like text, numbers, media files, etc. of any length. But, the output of hashing will always be of the same length. This fixed-length output of a variable input is known as a Hash or Hash value

Hashing is at the center of blockchain security because it secures the data of transactions in such a way that no one can access or change it. Once a piece of data is hashed and stored into the blockchain, it is next to impossible to steal or misuse it without the network knowing about it. If someone tries to dehash the hash of a block or transaction, they are going to need a lot of time, money and immense computational power to do so. It is beyond the scope of a normal PC to reverse the hash function and find out the input of a hash value. 

The hashing algorithm is applied to the blockchain design to fully support the security and integrity of it. Even a small portion of data that is already saved in the ledger changes, it will change the hash of that block. As the hash of one block will change, it will disrupt the hash of its following block. And this chain of mismatched hashes will continue. In this way, the blockchain network will know about a possible intrusion in their network. 

2. Properties of Hashing 

There are four main properties of hashing that contribute in making blockchain a secure network. Let us go through them one by one. 

a. Collision resistance: It is a property of hashing which states that it is nearly impossible to find two such input values whose hash value/output is the same. This is known as collision resistance of hashing due to which every input value will have a unique hash value as an output. However, it does not mean that the possibility of collision is zero, it only states that the chances are very very slim. 

b. Deterministic: Hashing is a deterministic process i.e. a single input will always have the same output. By this we mean, if we run the hash function for our input value “DataFlair”. No matter how many times we run it, it will always give the same hash value as a result. The hash value for “DataFlair” will be f591df8f845ca0d225a798599bd535c6b12664efc19fff7790c1c9f4f755ae20. Yes, that is what a hash value looks like! 

However, if we make a change in the input value like change the case of even a single alphabet or change something else. It will not give us this hash value in return. 

c. Irreversible: The process of hashing is an irreversible one, that is, once a value is hashed, we cannot get the original value from it. Even if someone tries to decipher the text and reverse the hash value to see the original value. They will need expensive hardware having a lot of computational power.  

d. Quick: Hashing of input values to convert them into unreadable hash values is a very quick process. Therefore, it saves a lot of time for the blockchain users and makes it a secure network altogether. 

Consensus algorithm: The Byzantine generals’ problem

Now, our discussion on security is incomplete without talking about the Byzantine generals’ problem. Let us understand what it is? How is it related to blockchain and its security? And what is the consensus system?

The Byzantine generals’ problem is the concept behind all of the security systems in use today. It explains a security concern or a scenario that one might have while exchanging important information with another party. During such an exchange between two parties, a third party might intrude and meddle with the confidential information. This generals’ problem explains such situations perfectly. 

In this scenario, there are three generals with their armies who want to attack and conquer a land (presumably a city). An interesting thing to note here is that all three generals must launch into the attack at the same time because if only one or two of them attack, there are strong chances of them failing. The three generals are stationed at three ends of the city. They are separated by each other by a significant distance. Now, in order to attack the city together, they need to agree upon a day and time for the attack. This requires efficient communication between the three army generals. 

An ideal plan to work this communication is to send messengers to other armies with a proposed day and time. Suppose General 1 figured that attacking the midnight of Friday will be favorable. Now, he wants the consensus of the rest of the two generals upon this. He sends his messengers to General 2 and General 3 who are stationed at the opposite ends of the city. The messenger will have to cross the entire city without being caught and deliver the message to other generals. Not only this, but he also needs to come back again with the response of the other generals. This means threatening the confidentiality of the information to malicious attacks twice. 

Such information exchange is prone to a lot of security breaches such as what if the messenger gets caught in the city? What if the message got changed in the middle or if messenger was a traitor and never delivered the message? What if one of the generals is a traitor and retreated on the day of the attack? All of these possibilities will cause the failure of the attack and the reason behind it will be a communication channel not secure enough. 

Now you might be wondering, how is this situation relevant to blockchain? Well, if you think, blockchain is also a similar setup only with way more generals (nodes) interacting in a decentralized point-to-point network. Security of the data that is getting transacted within a blockchain network is crucial. If the data is not secure, malicious third parties can gain access to it and misuse it which will disrupt the blockchain. 

As a solution to this problem, blockchain has a consensus protocol. We know that blockchain is a peer to peer network having a distributed ledger. The consensus system makes sure that every node in the network has the same copy of the ledger. The consensus algorithm involves a lot of processes like node verification, proof of work, proof of stake, etc. Consensus algorithm takes the consensus of every node on the network so that they have the same copy of the blockchain ledger ensuring overall consistency of data. 

Decentralized storage in Blockchain 

As we know, Blockchain functions on a decentralized network. Such networks have a peer-to-peer design where each node is capable of directly communicating with the other. The information about transactions going on on a blockchain network is added on blocks. Such new blocks are constantly getting validated and added on the main blockchain. Therefore, every node on the network can access this information that is getting updated at regular intervals. Therefore, the blockchain network and its security protocols ensures that the storage system is decentralized and accessible by all. 

How Blockchain prevents fraud and data theft 

There are certain defining aspects of Blockchain that makes it fraud and data theft proof. One property of Blockchain is securing the data by using cryptographic techniques. Cryptographic techniques like hashing and digital signatures makes it a next to impossible task for hackers to hack the ledger. Even if someone tries to steal the data or change it in the blockchain, they have to recalculate the hash values for the entire chain. This recalculation of hashes of hundreds of thousands of blocks is an unimaginably difficult task. No one with a normal PC and hardware is able to do this. 

Another aspect of it is the decentralized network and a distributed ledger. If someone tries to break into the network and make changes in the data to do fraud. They need to update this fake version of ledger or record on each node of the network. This is again an unachievable task as public blockchain networks are spread all over the world. There are lakhs of nodes spanning across the globe. It is impossible for a hacker to change the data on the copy of the ledger that each node has. Therefore, the bigger the blockchain network, the less are its chances of fraud and data theft. 

Preventing DDoS attacks in Blockchain 

DDoS attacks are Distributed Denial of Service attacks where the more a distributed group of attackers attacks a single entity or server. This overcrowds the server making its resources unavailable for the legitimate users. While the server is busy handling the fake traffic, attackers easily get access to steal the data hosted on that server. This problem of DDoS attacks is common in centralized systems like web servers. Once the attacker gains control over the server it gets exposed to theft.

Blockchain is a potential solution to this problem because of its peer-to-peer (P2P) nature. It has distributed data records (ledger) over a decentralized network. Therefore, there is no single point of attack possible by the DDoS method. 

Guardtime technology; Data security through Blockchain 

Guardtime is the largest cyber security technology that is based on the Blockchain system. It uses Blockchain’s concepts and framework to safeguard the data and maintain its integrity. Guardtime is a data management and cyber security solution that uses Keyless Signature Infrastructure (KSI) to protect data. KSI is different from the Public Key Cryptography that uses a pair of keys to secure data. KSI eliminates the role of keys completely and uses only hashing as a means to secure data. 

Guardtime propels the idea of data integrity rather than data confidentiality. This is why they do not take the entire data and encrypt it. Instead, they only take the fingerprints of that data and hash it. Only the information of a transaction like the data and time, identity and authentication is hashed. Later, only these three are needed for verification by the network. This innovative approach makes Guardtime the leading security solution company that uses Blockchain to secure their customer’s data. 


Although, ever since blockchain came into the real world, numerous cases of malicious attacks, security breaches, and network failures have surfaced. Security and blockchain experts from all over the world are coming up with new security solutions. There is a continuous effort being made in improving the security techniques for blockchain. Until then, we hope you were able to gain a grip on the fundamentals of security of the blockchain. 

Did you like our efforts? If Yes, please give DataFlair 5 Stars on Google

follow dataflair on YouTube

Leave a Reply

Your email address will not be published. Required fields are marked *