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A Review on Blockchain Security Issues and Challenges

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Blockchain is one of the emerging technology in recent years in the field of information technology. Blockchain is a decentralized, traceable, temper proof, and trustworthy distributed database system operated by multiple nodes. Blockchain is used not only in cryptocurrency or electronic cash, but also in other applications such as financial transactions, healthcare, insurance, IoT, manufacturing, education, etc., with the promise of more skills and higher resilience. Over the past few years, a significant number of public announcements and news have been made about its goals, partnerships, development, and implementation. However, the most important aspects and discussions on issues related to blockchain security, challenges and policies have been raised around the world. Focus on blockchain security issues and this review paper reviewed 80 research papers. Notable works in this review article are on the concept of blockchain ecosystems, the division of blockchains, the implementation of blockchains and finally security issues and blockchain challenges. This review paper will be helpful for the new research work and safety related issues for blockchain.
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A Review on Blockchain Security Issues and
Challenges
Md Rafiqul Islam
Mechatronics Engineering
International Islamic University
Malaysia
Kuala Lumpur, Malaysia
engrrafiqul@gmail.com
Mohammed Ataur Rahman
Mechanical Engineering
International Islamic University
Malaysia
Kuala Lumpur, Malaysia
arat@iium.edu.my
Muhammad Mahbubur Rahman
Mechatronics Engineering
International Islamic University
Malaysia
Kuala Lumpur, Malaysia
mahbub@iium.edu.my
Muslim Har Sani Mohamad
Accounting
International Islamic University
Malaysia
Kuala Lumpur, Malaysia
muslimh@iium.edu.my
Md Mahmud
Research Center of Nano-Materials
and Energy Technology
Sunway University
Kuala Lumpur, Malaysia
mahmud.md@ieee.org
Abd Halim Embong
Mechatronics Engineering
International Islamic University
Malaysia
Kuala Lumpur, Malaysia
ehalim@iium.edu.my
Abstract—Blockchain is one of the emerging technology in
recent years in the field of information technology. Blockchain
is a decentralized, traceable, temper proof, and trustworthy
distributed database system operated by multiple nodes.
Blockchain is used not only in cryptocurrency or electronic
cash, but also in other applications such as financial
transactions, healthcare, insurance, IoT, manufacturing,
education, etc., with the promise of more skills and higher
resilience. Over the past few years, a significant number of
public announcements and news have been made about its
goals, partnerships, development, and implementation.
However, the most important aspects and discussions on issues
related to blockchain security, challenges and policies have
been raised around the world. Focus on blockchain security
issues and this review paper reviewed 80 research papers.
Notable works in this review article are on the concept of
blockchain ecosystems, the division of blockchains, the
implementation of blockchains and finally security issues and
blockchain challenges. This review paper will be helpful for the
new research work and safety related issues for blockchain.
Keywords— blockchain, security, encryption, soft fork,
cryptocurrency, bitcoin.
I. INTRODUCTION
Blockchain technology has it is potential scope to
transform the way of business, communicate with their
customers, other businesses, and regulators. A person or
group of people in 2019, was using the pseudonym Satoshi
Nakamoto published a paper and introduced a new
cryptocurrency is called “bitcoin” and suggested a peer-to-
peer network (P-to-P) solution for online fund transfer from
one party to another without any third or trusted party [1]. It
is an ecosystem that growing faster to changes the
technological concept across the globe. Blockchain is a type
of distributed ledger technology that is a distributed and
immutable ledger to transfer ownership, keeping transactions
records, tracing assets, ensure transparency, trust, and
security for various types of transactions [2]. Though most
people believe one of its benefits is the inherent resiliency of
cybersecurity, still it is not a fully secured and cyber-attack-
free technological platform.
Today entrepreneurs, investors, and policymakers
become more focused on this latest new edge technology due
to its future possibilities to use for other customers, other
businesses, and regulators [3]. So, it will carry the security
threats which include serious impact due to intentional or
unintentional activities of participants of the blockchain
network, where social engineering techniques will be used to
gain confidential credentials [4]. Just a Compromise with
security, all valuable assets on blockchain could have a
severe impact that point-out the violation of laws and
regulations of the country [5].
Blockchain technology is one the biggest innovation of
the 21st century that has provided a wave from the financial
industry to manufacturing, and education as well [6].
Blockchain is capable to bring substantial positive changes in
the financial sectors, IoT, supply chain, voting, medical
treatment, insurance, education, and other industries as well
[7]. It has some distinct capabilities to minimize the cyber-
security risks and the security features are (I) Blockchain
increase the resiliency of the network from being a
compromise of single-point failure (II) Blockchain uses the
consensus mechanism which provides transparency and
integrity of the ledger (III) Very difficult for the hackers or
attackers to inject or deploy the malicious software or
malware [8]. On the other hand, some of the majors
blockchain security challenges like endpoint, scalability,
regulatory, third party vendor, and insufficient testing cannot
ignore [9]. A 51% attack is another type of attack on
blockchain where attackers or groups of people can take the
control of blockchain network [10]. In this article, we will
highlight the security issues and challenges of blockchain
technology.
II. CATEGORY OF BLOCKCHAIN
According to the nature of business and user
requirements, the blockchain can be divided into the public
blockchain, private blockchain, and consortium blockchain
[11].
Fig
1
. P
ublic blockchain,
Fig
2
. P
rivate blockchain,
Fig
3
. C
onsortium
blockchain
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A. Public Blockchain
Blockchain protocols based on Proof of Work (PoW)
consensus algorithms are open source where anyone can
participate without permission [12]. Anyone can download
the code and install their local device through which they can
validate the transaction in the network. Anyone can send the
transactions through the network and monitor them in the
blockchain as well as can read and write transactions on the
public network [13]. For example, Bitcoin, Ethereum, XRP,
Dash, Litecoin, Dogecoin, etc. figure 1 shows the public
blockchain.
B. Private Blockchain
Permissioned private blockchain may be distributed in
the restricted to an arbitrary extent but the write permissions
are strictly controlled by one organization [12]. The
advantage of the private blockchain is established by groups
and participants who can verify the transactions internally. It
has the risk of security breaches like a centralized system
whereas public blockchain is secured by a game theory
incentive mechanism. However, private blockchain will be
more advantageous than others when it will come to the state
data privacy act and other regulatory issues. Figure 2 shows
private blockchain.
C. Consortium Blockchain
Private Consortium Blockchain is controlled by an
organization or the leadership of a group and they do not
allow all internet users to participate in the process of
verifying the transactions [12]. The administrator of a
consortium chain defines user access rights. A consortium
blockchain is faster, highly scalable, and provides more
transaction privacy other than public blockchain. For
example, Ripple is one of the largest cryptocurrencies to
support the permission-based blockchain network [14].
Figure 3 shows consortium blockchain.
III. APPLICATION OF BLOCKCHAIN
Blockchain applications are not only limited to
cryptocurrency, but it has also many other applications in
different sectors which may save the business time and cost
as well [15]. Such applications software can be grouped in
different sectors like the financial sector, healthcare, etc.
A. Cryptocurrency
Blockchain technology is widely used in the financial
sector which is called cryptocurrency and these currencies
are introduced by application software [16]. Bitcoin is the
original decentralized cryptocurrency that was introduced by
Satoshi Nakamoto in 2009 and the data structure and
transaction system were built by blockchain technology, and
it has no physical currency [17]. Cryptocurrency uses a
highly secured technique called encrypted technology for
making direct transactions between buyer and seller without
third-party intervention [18]. The sender digitally signs the
message or input with his/her private key before sending
bitcoin and sends the same to the receiver’s public key
through broadcasting to the network where the verifications
are completed by other users [19]. A few numbers of
cryptocurrency systems are as follows table 1.
TABLE I. CRYPTOCURRENCY SYSTEMS
Cryptocurrency Hash Algorithm Year Mining
Method
Bitcoin [20] SHA-256 Proof of Work
Litecoin [21] Scrypt Proof-of-
Work Algorithm
2011 Proof of Work
Monero (XMR)
[22]
Ring signatures. 2014 Proof of Work
Ethereum [23] Ethash 2015 Proof of Work
Ripple [24] SHA 512 2012 Consensus
Primecoin [25] Cunningham chain 2013 Proof of Work
Peercoin [26] SHA-256 2012 Proof of Work
Blackcoin [27] Scrypt 2014 Proof of Work
B. Smart Contract
Smart contracts execute is automatic executing contracts
based on the agreement between buyer and seller which is
written into the lines of code, and the codes and agreements
exist into the decentralized blockchain network [28]. Most of
the benefits of smart contracts are visualized in business
collaborations where the agreements are build-in, and all the
participants knew the outcomes without third-party
involvements [29]. Smart contracts work like a person where
the codes are executed automatically and can hold the assets
temporarily [30]. Ethereum is an open source blockchain
platform where smart contracts exist and offering a
decentralized virtual machine to operate the contract through
using a digital currency called ETH [7].
C. Hyperledger
Hyperledger is an open-source platform, a collaborative
effort including leaders in finance, banking, supply chain,
IoT, manufacturing, and technology, and hosted by Linux
Foundation [31]. Hyperledger does not have any
cryptocurrency, and the access into the network is applicable
for the authorized members where the transaction
mechanism is controlled by chaincode (smart contract) [32].
The transaction request is submitted into the Hyperledger
Fabric by the user for ordering and validation, where the
request initializes a chaincode in a specific channel. The
components of the Hyperledger Fabric are ordering nodes,
peer nodes, and client applications [33]. Through an isolation
channel, the privacy of the transaction mechanism in the
network is ensured between the participants.
D. Other Applications
Blockchain is not only applicable to cryptocurrency
mining and smart contract, but also for other sectors like
healthcare, education, voting, supply chain management,
IoT, insurance, international payment, trade finance, etc.
[34].
IV. SECURITY ISSUES AND CHALLENGES OF BLOCKCHAIN
A. 51% Attacks
The 51% attack into blockchain network is a technique
that intends to fork a blockchain for double spending [35].
The main security challenge of blockchain is 51% attacks,
which is comparatively hypothetical, where the attackers can
roll back the transactions in the alternative block in a side
chain or branch and can hide the information that is
happening in the main chain of the blockchain [36]. The
probability of mining blocks by the miners depends on the
proof of work. To mining more blocks, miners together and
use more computer power to hold the network control. If
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anyone or group can hold more than 51% computational
power, the person or group can find out the nonce which will
help miner/miners to decide which block belongs to
permissible and which are not [7]. It will help the attacker to
modify the transactions that may cause the double-spending
attack, which also helps to hold the blocks from verifying the
transactions [37]. However, it is not always required to gain
51% hashing power to compromise the blockchain network,
the double-spending attack is also possible with less than half
of the hashing power, but the probability of success for the
same is very less [38].
B. Forking issue
Forking is another blockchain problem. Forking indirect
divergence in the blockchain can be temporary or permanent,
and it can happen when a blockchain splits into two parts
[39]. Forking is different for each type of blockchain which
depends on its architecture and use case [40]. There are two
types of forking:
i. Hard Fork
The hard fork is the permanent changes of the protocols
into a blockchain network, splits a single cryptocurrency into
two which validates blocks and transactions that were
previously invalid or vice-versa [41]. Network nodes are
using the older version, which is not accepted by the new
version, the transaction into the new chain is invalid into the
older chain. Miners need to upgrade their old version with
the latest version for doing transactions into the fork chain.
For the adoption and incorporation of version changes, the
miner nodes are required to vote in the blockchain network
[42]. Bitcoin cash is one of the examples of a hard fork in
August 2017, and the Bitcoin cash wallets rejected the
transactions for Bitcoin and blocks [43]. Figure 4 shows the
hard fork issue.
Fig.
4
. Hard Fork
ii. Soft Fork
Soft fork in blockchain means the change of software
protocol where the previously valid transaction blocks are
invalid, and the older nodes recognize the new transaction
blocks as valid which means soft fork is backward
compatible [44]. In a soft fork, most of the miners need to
upgrade the software version for enforcing the new rules
[45]. The computing power required for the new nodes is
much higher than old nodes, the blocks that mines by the old
nodes will not be validated by the new nodes, but both the
new and old nodes will work into the same network [7].
C. Eclipse Attacks
In the eclipse attack, the attacker attacks on a
decentralized network to isolate a specific user or users,
rather than an attack on the whole network [66]. This type of
attack is possible because a decentralized blockchain
network does not allow all the computers to be
simultaneously connected to all other computers of the
network. A Bitcoin node can only hold 8 outgoing and 117
incoming connections [46]. Due to the limited outgoing
connections, the attackers may establish the connections
through injecting malicious codes. For Ethereum, there are
two types of eclipse attacks that can be occurred. First, the
attackers can establish Maxpeers incoming PCP connections
to its malicious nodes before clients establish outgoing TCP
connections, and the second eclipse is to be owing to the
table [45]. Through rebooting, there is a high probability of
the victim to occupies all outgoing nodes to its adversarial
nodes [46].
D. Application Bugs
Any software-based solution is developed by a human
being. The act of a human being is not error-proof. So,
human coding errors create the conduits for threats of
blockchain applications. Most of the blockchain applications
belong to an open platform and anyone can join these
networks. For example, one of the biggest MtGox attacks
occurred in 2014 with a declared loss was $600 million, the
other one Bitfinex occurred in 2016 with the cost of $65
million [47]. In 2016 hackers exploited the coding errors in
the program of a virtual company named Distributed
Autonomous Organization (DAO) and theft Ether digital
currency fund worth $55 million [48].
E. Short Address
A short address attack is the weakness of the Ethereum
Virtual Machine (EVM), and it is an input validation bug that
occurs from the sender’s end due to weak transaction
generation code [49]. Short Address Attack occurs when the
contract receives less data than expected, and the EVM
includes zeros at the end of the address to ensure the 256-bit
data types [50. The attacking strategy of a short address is
like SQL injection bug [51].
F. Timestamp Dependence
Timestamp Dependence vulnerability can be exploited by
the bad miners, and due to personal benefit, miners can re-
arrange the timestamp within few seconds [52]. In a
blockchain system, the miner has the choice to set the
timestamp into the block by few seconds [53]. It is capable to
detach the Ethereum network from the global clock. Smart
contract generates random numbers to determine the lottery
result which helps the miners to put a timestamp within 30
seconds of block validation, and it provides the opportunity
for miners for exploration.
G. Scalability Issue
Blockchain is a distributed ledger system. The popularity
of this new edge technology has increased tremendously
along with other IT-enabled services in different sectors like
IoT, education, agriculture, healthcare, insurance, banking,
and finance, etc. The processing power or speed of
blockchain is completely dependent on computing powers.
For comparison purposes, Bitcoin processes 4.6 transactions
per second whereas VISA processes 1,700 transactions per
second on average [54]. The blockchain-based transaction is
very slow which is the major concern for enterprises, and it
depends on the high performance inherit transaction
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processing system [55]. The lack of standard and i]
nteroperability in a different blockchain platform is another
challenge for adaptability [56]. As per Deloitte, five things
need to overcome for the widespread adoption of blockchain
systems which are ((i) transaction speed, (ii) standard and
interoperability, (iii) enhance technical feasibility (iv)
supportive regulation, and (v) expansion of consortia [57].
Although, a significant number of scaling methods have
been proposed for adoption the of blockchain technology,
each of them comes with its limitations. One of the most
notable issues is the sharing of the database. For blockchain
development, database sharing is processed to enhance the
computational and storage workload into the storage system
across the Peer-to-Peer (P2P) network, so that every node
can process transactions only its corresponding sharing
database [58]. The major challenges of sharing the database
in the blockchain are related to security and communication
among the nodes of the network, which includes the extra
complexity for blockchain developers that require an extra
level of communication protocol.
However, there are being various solutions have been
proposed to solve these issues. Proof of Stake (PoS) is more
efficient than Proof of Work (PoW), two nodes in Practical
Byzantine Fault Tolerance (PBFT) research a consensus for
the event of malicious node being exist, Delegated Proof of
Stake (DPoS) consensus that represents the democratic
consensus; and Tendermint is another consensus algorithm
based on a Byzantine algorithm which very scalable to
perform approximately 10,000 transactions per second [59].
H. Regulatory Issue
“Regulation of Cryptocurrency Around the World” was
published in 2018 to address this issue [60]. The
implementation of blockchain applications across the world
must go for a lot of complex regulation in terms of economic
and political, and no central bank policy available for the
same. For example, some countries banned Bitcoin and not
accepted them for payment. Bitcoin is a decentralized
blockchain and controlled by a specific person or group, and
no central banks have control over it. Until a proper
regulatory framework is established, it is not possible to use
digital currency to make the payment through banking
channel as well. Further research is required before applied
cryptocurrency globally.
A total number of 82 countries across the globe have
declared the cryptocurrency is legal, but this legalization
does not mean that the government of those countries
supports the virtual currency any way [61]. And it raises the
question about the usability of the blockchain application.
Further research is required before applied cryptocurrency
globally.
I. Integration Issue
Changing the existing system with a new blockchain
application is another big challenge for the organization in
terms of cost, infrastructure setup, human mindset,
management expectation, etc. There is a major corporate
challenge how to integrate the new application with the
existing legacy system, where organizations are required to
completely restructure their old system in such a way for
successful integration of two technologies [62]. Due to a lack
of skilled blockchain developers, it is very hard to pool
technical experts for the same. On the other hand, the
incident of data loss and breach that may discourage the
organizations from transitioning to blockchain-based
application. A breach of data loss may encourage fraudulent
activities which may issue the blockchain security concern
and could cause a barrier for new application integration
problems [63].
J. Inegration Issue
Changing the existing system with a new blockchain
application is another big challenge for the organization in
terms of cost, infrastructure setup, human mindset,
management expectation, etc. There is a major corporate
challenge how to integrate the new application with the
existing legacy system, where organizations are required to
completely restructure their old system in such a way for
successful integration of two technologies [57]. Due to a lack
of skilled blockchain developers, it is very hard to pool
technical experts for the same. On the other hand, the
incident of data loss and breach that may discourage the
organizations from transitioning to blockchain-based
application. A breach of data loss may encourage fraudulent
activities which may issue the blockchain security concern
and could cause a barrier for new application integration
problems [58].
TABLE II. SUMMARY OF SECURITY ISSUES AND CHALLENGES.
SI Security issues and
challenges
Description
01 51% Attacks The 51% attack into a blockchain network
is a technique that intends to fork a
blockchain for double-spending where the
attackers can roll back the transactions in
the alternative block.
02 Forking issue Forking is indirect divergence in the
blockchain can be temporary or permanent,
and it can happen when a blockchain splits
into two parts.
03 Eclipse Attacks In the eclipse attack, the attacker attacks a
decentralized network to isolate a specific
user or users, rather than an attack on the
whole network.
04 Application Bugs The act of a human being is not error-proof.
Human coding errors may create the
conduits for threats of blockchain
applications.
05 Short Address A short Address Attack occurs when the
contract receives less data than expected,
and the EVM includes zeros at the end of
the address to ensure the 256-bit data types.
06 Timestamp
Dependence
Timestamp Dependence vulnerability can
be exploited by the bad miners where
miners can re-arrange the timestamp within
few seconds.
07 Scalability Issue The blockchain-based transaction is very
slow which is the major concern for
enterprises.
08 Regulatory Issue The implementation of blockchain
applications in different sectors is highly
challenging due to complex regulation in
terms of economic and political, and no
central bank policy is available so far.
09 Integration Issue Changing the existing system with a new
blockchain application is another big
challenge for the organization in terms of
cost, infrastructure setup, human mindset,
management expectation, etc.
K. Success and failures of blockchain security
The security of the blockchain heavily depends on
cryptography to achieve data security where the block hash is
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generated on the present block and the previous block. The
success factor of blockchain security depends on the
consortium including business cases, robust governance
policy, operational issues, data privacy, and other regulatory
environments [59]. On the other hand, the default blockchain
security is not enough to protect the security threats
including payment processors, smart contracts, and the third-
party vendors that comparatively maintaining the weak
security measures on their apps and websites. As a result,
hackers are stealing money from blockchain platforms by
exploring the design, implementation, and execution of these
networks [60]. The figure 5 below is presenting the statistics
of total transactional amount vs hacking amount from 2015
to 2020 [61]-[80].
Fig
5
.
Cryptocurrency tr
ansac
tion vs ha
c
king statistics (2015
2020)
V. CONCLUSION
There is no doubt that the blockchain is an emerging
technology in recent years, especially in the field of
information technology due to its decentralized platform and
peer-to-peer network. There is a remarkable and momentous
scope for blockchain for various organizations which will
encourage the development of such a reliable, secure, and
immutable system in the feature. Though it has problems
need to be addressed, some of the issues have already been
improved along with new technological concept on
blockchain application getting more stable. Despite being a
significant number of advantages, it contains some security
concerns which have been highlighted in this article. The
regulator needs to address the corresponding regulatory
issues for this new edge technology, and at the same
organizations should be ready for adoption of the blockchain
technology that may reduce the impact on the current system.
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