How to Assess Blockchain Security and Network Stability

Blockchain security and network stability are essential for the success and adoption of any decentralized system. 

In the context of cryptocurrencies, blockchain security features ensure the integrity of transactions and protect against threats like double spending, data security, frauds, currency reproductions, and others. 

Therefore, gaining a better understanding of blockchain security is fundamental and directly linked to the operation and trustworthiness of cryptocurrencies.

Read below to learn about the common methods and tools that can help you evaluate how secure and stable a blockchain network is.

Factors that Contribute to Blockchain Network Security

Blockchain security is a network’s ability to resist attacks and maintain the integrity and validity of the data stored on the ledger. 

Some of the factors that affect blockchain security are:

The consensus mechanism 

This is the process by which the nodes in the network agree on the state of the ledger. Different consensus mechanisms have different trade-offs in terms of speed, scalability, and security. 

For example, proof-of-work (PoW) consensus requires a lot of computational power and energy to validate transactions, but it also provides a high level of security against malicious actors. 

Proof-of-stake (PoS) requires less energy and resources, but it also introduces some risks like the "nothing at stake" problem, where validators have no incentive to follow the rules.

The network topology

This is the structure and configuration of the nodes in the network. A network can be either centralized or decentralized, depending on how many nodes control the majority of the resources and influence.

A centralized network is more vulnerable to attacks, as a single point of failure can compromise the whole system.

A decentralized network is more resilient, as it distributes the power and responsibility among many nodes.

Cryptography

This is the science and art of securing information using mathematical techniques. Cryptography is essential for blockchain security, as it ensures that only authorized parties can access and modify the data on the ledger. 

Some of the cryptographic tools used in blockchain are:

•  Hash functions – mathematical functions that map any input to a fixed-length output, called a hash or a digest. Hash functions are used to verify the integrity and authenticity of data, as any change in the input will result in a different hash. For example, Bitcoin uses the SHA-256 hash function to generate unique identifiers for transactions and blocks.
• Digital signatures –  schemes that allow a party to prove their identity and ownership of a message or a transaction. Digital signatures are based on public-key cryptography, which involves two keys: a public key and a private key. The public key can be shared with anyone, while the private key must be kept secret. Senders use their private key to generate a signature, which can be verified by anyone using their public key; this is how they sign a message.

For example, Ethereum uses the ECDSA algorithm to generate and verify digital signatures.

• Encryption –  the process of transforming data into an unreadable form, using a secret key. Encryption is used to protect the confidentiality and privacy of data, as only parties who have access to the key can decrypt and read the data. 

For example, Monero uses the CryptoNote protocol to encrypt transaction amounts and addresses.

Nodes

The significance of the number of nodes within a blockchain network is a crucial security metric.  A higher count of nodes enhances the security of the blockchain network, requiring more nodes under an attacker's control to exert influence over the entire network.

• The ratio of inbound to outgoing traffic serves as an indicator of a node's data exchange activities. A node handling a large proportion of traffic demands stronger defense mechanisms, as an elevated traffic ratio increases the vulnerability of the node to potential attacks.
• Node authentication – a rigorous node authentication prevents unauthorized nodes from entering the network, ensuring the overall safety of the network.

Here’s a clearer view of how blockchain-based authentication works:

Source: Hindawi

• Node isolation involves segregating specific nodes within a blockchain network. When a node is isolated, any impact or compromise is confined to that specific node, preserving the overall security of the network. Node isolation acts as a crucial safeguard, ensuring that failures or attacks on a particular node don’t affect the entire network.

Data integrity

Blockchain’s size and node performance are part of data integrity, an important property that establishes if data is used accurately and reliably. 

The blockchain's length, often denoted by the number of blocks it encompasses, is a crucial metric in assessing the blockchain's integrity.  The reason behind this is that any tampering with the data could potentially shorten the chain's lifespan.

The hash rate, or the quantity of hashes processed on each block, also plays a pivotal role. A higher hash rate corresponds to increased confidence in the data's integrity.

One essential process for ensuring data accuracy on the blockchain is the Data Integrity Check (DIC). This involves systematically verifying data accuracy on the blockchain. For example, Merkle trees provide an effective means to conduct such checks, especially when dealing with extensive volumes of data on a blockchain—a distributed data structure facilitating enhanced data integrity assessment.

Smart contracts security

For smart contracts, some of the essential elements that need to be fulfilled include:

1. Limited access to key functions – this helps prevent unauthorized use.
2. Minimized code complexity – the code should be as simple and straightforward as possible as this can help reduce the risk of errors and vulnerabilities.
3. Tested and audited contract code – the contract code should be thoroughly tested and audited to identify and rectify any potential security issues.
4. Covers a disaster recovery plan – a well-thought-out disaster recovery plan should be in place to handle any unforeseen issues or breaches.

The Importance of Blockchain Network Stability

Blockchain network stability refers to a network’s ability to function smoothly and efficiently, without disruptions or delays. 

Some of the factors that affect blockchain network stability are:

Scalability

This is the capacity of a network to handle an increasing amount of transactions and users, without compromising its performance or security. Scalability is one of the main challenges facing blockchain networks, as they often face bottlenecks and congestion when demand exceeds supply. Some of the solutions that aim to improve scalability are:

• Layer 2 solutions: protocols that operate on top of the base layer (the blockchain), and provide faster and cheaper transactions, without sacrificing security or decentralization. 
• Sharding: a technique that splits the network into smaller units, called shards, each with its own subset of nodes and transactions, allowing parallel processing.

Interoperability

This is the ability of different blockchain networks to communicate and exchange information with each other, without intermediaries or barriers. Interoperability can enhance scalability by allowing cross-chain transactions and collaboration among diverse platforms. 

For example, Polkadot connects multiple blockchains into a single ecosystem.

The governance

This is the process by which decisions are made and implemented in a network, like protocol upgrades, parameter changes, or dispute resolution. Governance is crucial for blockchain network stability, as it determines how responsive and adaptive a network is to changing needs and circumstances. Some of the models of governance are:

• On-chain governance –  decisions are made by voting on proposals using tokens or coins as votes. On-chain governance is transparent and democratic, but it also requires high participation and coordination among stakeholders. 

For example, the Tezos network uses on-chain governance to manage its protocol evolution.

• Off-chain governance –  decisions are made by informal or formal groups of stakeholders, such as developers, miners, users, or investors. Off-chain governance is flexible and efficient, but it also lacks transparency and accountability. 

Bitcoin is a blockchain network that relies on off-chain governance to reach consensus on protocol changes.

• Hybrid governance – combines elements of both on-chain and off-chain governance, to balance the advantages and disadvantages of each. For example, Decred is a blockchain platform that uses a hybrid governance system, where stakeholders can vote on proposals using both tokens and tickets.

To evaluate blockchain security and network stability, you need to consider the various factors and metrics that reflect a network’s performance and health. 

Some of the methods and tools that can help you do that are:

Security audits

These are independent reviews and assessments of the code, design, and architecture of a blockchain network or a smart contract, to identify and fix any vulnerabilities or flaws that could compromise its security. Security audits are usually performed by professional firms or experts, who use various techniques such as static analysis, dynamic analysis, formal verification, or penetration testing. 

Network monitoring

This is the process of collecting and analyzing data from the blockchain network, such as transactions, blocks, nodes, fees, or latency, to measure its performance and detect any anomalies or issues. Network monitoring can be done using various tools and platforms that provide real-time or historical data visualization and analytics. 

For example, Etherscan provides network monitoring and exploration for Ethereum.

Benchmarking

This is the process of comparing and evaluating the performance and features of different blockchain networks or platforms, using standardized criteria and metrics. Benchmarking can help you understand the strengths and weaknesses of each network or platform, and make informed decisions based on your needs and preferences. 

For example, Blockchain Benchmarking is a research project that provides comparative analysis and evaluation of various blockchain networks and platforms.

Conclusion

The evaluation of security and network stability requires a multifaceted approach. By understanding the fundamental principles of blockchain security, conducting thorough threat modeling, assessing network stability, and implementing continuous monitoring, you can navigate the intricacies of blockchain technology with confidence.