6 Ways Enterprises Can Secure Private Blockchains

There has been significant growth in organizations deploying private blockchain technology. But despite its reputation, it is essential not to assume blockchain is secure just because it relies on cryptography. An appropriate security design with controls that addresses an organization’s acceptable risk should be applied and reviewed before deploying blockchain to a production environment.

I have had various conversations with people at conferences and events about this technology, and many immediately begin discussing Bitcoin or Ethereum, but these are not private blockchains—they’re public blockchains. I have observed that many people do not know that cryptocurrencies are just one application of blockchain technology. It is essential to know the difference between the two.

A public blockchain is permissionless and anyone can join the network and participate in the blockchain. Most cryptocurrencies you hear about on the news or read about on social media are public blockchains and open for others to read and write within them. In addition, transactions completed on a public blockchain are typically immutable and available for others to see.

A private blockchain is permission-based and uses access controls configured to restrict who can participate in the network. Only the members of the network will know about other participants.

With a private blockchain, any organization could implement its blockchain and control which transactions are added to the chain. Of course, it needs to be a secure system, but it will still be based on the trust and reliance of the centralized authority or third party that manages it.

Growing Adoption of Private Blockchains

Many Fortune 500 organizations are in the process of planning a deployment or have deployed a private blockchain within their network. According to Fortune Business Insights, the blockchain market is projected to grow from USD $7.18 billion in 2022 to USD $163.83 billion by 2029.

Enterprises have realized that private blockchains are evolutionary and have implemented this technology within their business processes. Many of these enterprises use the Hyperledger Fabric to develop their private blockchain. The Hyperledger Fabric is an open source platform/framework for building a private distributed ledger managed by the Linux Foundation.

There are a number of emerging use cases for private blockchains today. Many health care organizations are beginning to use private blockchain technology to help doctors, patients and insurance providers transfer sensitive medical information securely using smart contracts to define the sharing parameters.

In technology, the software supply chain can improve the transaction processes of the supply chain by increasing the clarity and traceability of transactions with a private blockchain. Enterprises that have access to the ledger can view data about the previous transactions. This fact increases accountability and reduces the risk of counterfeit transactions.

A diamond mining company used a private blockchain to verify the authenticity of diamonds to ensure they are not blood diamonds or that do not come from specific sanctioned sources.

In the future, I expect to see more banks partnering to develop consortium blockchains to speed up transaction time and verification when account holders need to transfer funds from one bank to the other. It is essential to note this would not necessarily involve cryptocurrency but instead could involve the standard transfer of a specified nation’s currency.

Private Blockchain Vulnerabilities

There are many advantages to a private blockchain over a public one such as a faster transaction speed, the ability to reverse transactions and lower energy and power consumption. Still, it does not have an advantage when it comes to security. It is typically less secure and more prone to attacks, data breaches and manipulation. As a result, it is much easier for bad actors to endanger the entire network.

Private blockchain operators must decide how to resolve the problem of lost identification credentials, particularly for systems that manage physical assets. Bitcoin and Ethereum provide no recourse for those who have lost their private keys and, if those are lost, they are nearly impossible to recover. In recent cases, investors have lost their private keys and cannot access millions of dollars in gains from their investments.

In a private blockchain, owners can decide whether and under what circumstances to reverse a verified transaction, particularly if that transaction appears to be a theft. Also, only a single organization can read and write on the ledger. In many cases, they can delete a block. For this reason, private blockchains can be more susceptible to attacks, whereas in a public blockchain, blocks cannot be deleted or transactions reversed by any authority.

How to Secure Your Private Blockchain Network

Here are six steps organizations should consider for securing their private blockchain solution.

  1. Use the privacy-by-design concept in the early design phase. When using this approach, you will consider data management, retention and deletion in the earlier stages of the design. You will consider regulatory requirements such as GDPR and other privacy laws relevant to the data. It is important to note that taking this approach may affect the type of data that can be stored on the chain due to any regulatory requirements. Still, the earlier you can determine this the better, as you can ensure that you have an optimal design to deploy into production. This approach will identify any off-chain services that your private blockchain will rely on and ensure the appropriate controls are applied to address any risk. For example, if you use a third-party provider for data validation and that provider gets hacked, your private blockchain will be exposed.
  2. Complete a risk assessment before deployment. Work with relevant business units within and outside of IT to ensure that you have identified the acceptable risk of deploying a private blockchain within the environment. Ensure that controls are in place to protect the data with a level of residual risk acceptable to the business. It is essential to obtain input from all stakeholders.
  3. Periodically perform a third-party risk review of vendors and users on the blockchain. Don’t trust anyone connecting to your blockchain and ensure that your requirements for connectivity are documented and reviewed periodically. This is very important in a private blockchain since there is a possibility that data can be deleted or modified, and you do not want any insecure sources connected that could exploit this vulnerability.
  4. Have a robust key management process in place. Implementing a secure, scalable and resilient key management process is extremely important. This would include the backup of keys, automated management/rotation of keys, enforced key management requirements and, possibly, hardware to store them. Protecting these keys is essential to safeguard the data and environment, and any unauthorized access to the keys could break the encryption. This could cause significant issues if the central authority were to have their private key stolen by an attacker.
  5. Continue to apply production-grade security controls to your private blockchain. For example, ensure that firewall protection, two-factor authentication, file integrity monitoring, endpoint security controls, etc. are applied to your private blockchain. Don’t assume that since it is encrypted standard security controls are unnecessary; because the environment is not a public blockchain, you have to prevent any unauthorized modification of data.
  6. Use a trusted cybersecurity vendor to audit and review your design and controls. This includes penetration tests, security assessments, smart contract audits, source code reviews and blockchain infrastructure audits. A trusted organization should only do this with experienced resources. It would be best to do this before deploying a private blockchain into the production environment. This can be used periodically to identify any gap in the design and prepare the infrastructure for emerging threats or automated agents.

Following these steps may increase the time before deploying a private blockchain application. Still, it is well worth ensuring that your data is protected while helping prevent an organization from having to delay a production deployment due to security concerns.

Applying these measures for protection may aid in reducing the cost spent if the organization were to get hacked or if partners or clients on the private blockchain were to lose trust in the network.

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Mark Dargin

Mark Dargin is an experienced security and network architect/leader. He has over 20 years of experience designing, managing, and securing complex WAN and LAN infrastructures for large and medium-sized organizations. Mark’s experience includes leading and managing large scale compliance and risk management initiatives and programs. He is a member of the Michigan Cybersecurity Civilian Corps., a rapid response team of experienced IT security volunteers who will assist the state and industries during major cybersecurity incidents. Mark holds a bachelor’s degree in Business Management and Communications from the University of Michigan-Dearborn , master’s degree in Business Information Technology from Walsh College in Troy, Michigan and an Advanced Computer Security Certificate from Stanford University. Mark holds various active certifications, including the CISSP (Certified Information Systems Security Professional), PMP (Project Management Professional), GIAC GMON (Continuous Monitoring & Security Operations), GIAC GNFA (Network Forensics Analyst) and many other vendor related certifications.

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