Welcome!

IBM Cloud Authors: Liz McMillan, Pat Romanski, Yeshim Deniz, Carmen Gonzalez, Elizabeth White

Related Topics: FinTech Journal, @CloudExpo, Cloud Security, @DXWorldExpo, @ThingsExpo

FinTech Journal: Article

Privacy and Security on Blockchains | @CloudExpo #FinTech #AI #Blockchain

Decentralization of everything might still seem a bit utopian if you inspect it closely

Privacy and Security on Blockchains: What Protection Measures the Networks Are Adopting to Secure Their Users

Decentralization of everything, the great new idea of which the web can’t stop babbling, might still seem a bit utopian if you inspect it closely.

Yes, blockchains are likely to reshape our economy, or a huge part of it, and benefit considerably those who are currently unbanked.

They might also facilitate the creation of rating/reputation systems that are not controlled by any single entity and thus allow people (say Uber drivers who’d like to work for Lyft) to switch employers without having to establish their credibility anew.

They might give users complete control over their assets; protect them, to a degree, from being robbed and provide tools to sustain privacy even when a state-level actor – a bank or a government – is after their identity.

But before these things start to happen the issues of privacy and security, which are currently pressing on blockchains, must be dealt with.

In this article, we’ll discuss how some major networks are trying to tackle the problems of safety and dispense advice to those using decentralized ledgers as to how to keep their assets protected at all times.

Let’s get started!

The concept we should introduce first before we proceed to talk about security is that of digital wallets.

In layman’s terms, a wallet is a software program in which public and private keys are stored. After accessing it, one could manage the crypto assets it contains, and carry out, seamlessly, all sorts of transactions.

Currently, there are four types of digital wallets in the blockchain ecosystem – desktop, web, mobile, and hardware ones. And to protect them, users encrypt the wallets with long, complicated passwords.

So, what might go wrong?

Security on Blockchains: What might go wrong?

In 2011, a member of bitcointalk forum (someone “allinvain”) wrote a panicky post – a cry for help – to his fellow forum members after finding out that he’d been hacked and robbed of 25,000 BTC (which now, in October 2017, would be worth about $150m).

Evidently, the attacker had managed to gain access to allinvein’s PC and had, somehow, emptied out his digital wallet. He (or she) had either sent the transaction directly from the victim’s machine or copied the wallet.dat file and ran it from his (or her) own.

Another noteworthy theft was reported on the Bitcoin subreddit. The user, asoltys, was fairly careful with his blockchain.info wallet, so it came as an utter shock to him to discover, one day, that 160 bitcoins had been stolen from it.

The vulnerability that made the theft possible lay with blockchain.info mobile app; it had to do with the user’s rooting his Android phone.

Generally, when one attempts to enter their blockchain.info wallet (from a desktop computer) they are asked to type in two passwords – a long one (16-20 digits) to access the entire wallet, and a shorter one (typically 8 digits) to get ahold of private keys.

However, since typing lengthy passwords is tiresome on a smartphone, the wallet app will often have it memorized, and only require you to enter the second one.

Therefore, if someone hacks into your phone, the one that’s been rooted, they might find out where the main password is stored and decrypt it. Afterward, they can crack the second PIN code (hackers often use GPU or cloud-based computing clusters to brute force an 8 digit password promptly) and gain complete control over your wallet.

A few smart contracts on Ethereum, the second largest blockchain in the world, were attacked as well..

Ethereum isn’t just a cryptocurrency. It is also a platform on which one could build decentralized apps.

The software that’s hosted on the network, therefore, must be designed impeccably: its code must contain zero vulnerabilities. Or else, it’s bound to fall prey to clever attackers.

Here are some famous (or should we say infamous) instances of hacking on the Ethereum network:

The DAO hack. One of the first major ICOs had a bug in its smart contract, of which attackers took advantage. Nearly $50m worth of ether was stolen and, though the assets were eventually returned to the DAO token holders (the blockchain developers performed a hard-fork), the hack led to a network split.

The Parity hack. The second biggest hack in the history of Ethereum happened a few months ago and resulted in a 153,037 ETH loss (~$32m at the time of theft). The vulnerability, which hackers managed to exploit, lay in the source code which Parity, a wallet “vendor” on Ethereum, had been giving out to users who wanted to create a personal multi-sig wallet.

We won’t be delving deeply into the technical aspects of the robbery; we’ll just say that, in a nutshell, bad actors sent two transactions to the affected contracts – one to obtain ownership of the wallets and another to drain them; they were able to do so due to a tiny flaw in the multi-sigs’ code.

What happened next, however, was even more amazing. A group of white cap hackers promptly emptied out the rest of the wallets to prevent further damage. They saved over $75m worth of ether and then returned the funds to the rightful owners once the vulnerability was removed.

The weak spot, according to the Parity blog, had been fixed; the new, improved version of their implementation of a multi-sig wallet was deployed after June 20.

But on November 8, just a few months later, it, too, got hacked due to a bug in the multi-sig’s code.This time, the loss of funds amounted to ~$155m worth of Ether.

Both Parity and Ethereum itself have yet to make a decision as to how to return the funds to rightful owners. Most likely, we’ll see another fork.

But, as of now, things are still a bit unclear.

How Can Developers Improve Security on Blockchains?
ZKP protocols

Security on Blockchains: ZKP protocols

Since security on public networks depends largely on whether private data is accessed by a malicious actor or not, some major blockchains are planning to adopt something known as zero-knowledge proof (ZKP) protocols.

To understand what ZKP is, imagine this: you’re at a bar, your phone has just died; you’re standing alone, sipping at a cocktail, when, suddenly, a guy shows up from nowhere and starts talking, anxiously, about how your close friend has gotten in some serious trouble.

He invites you to walk a few blocks with him, to the place where she’s currently at, so you can rescue her together. And says persuasively that there’s no time left for stalling.

You realize you’ve never met the guy, but, again, your phone is shut off, there’s no way of finding out whether he’s telling the truth and, frankly, you are worried.

So, what do you do?

Well, you could interrogate him. Ask specific and complicated questions – the ones only a person who has really seen her would be able to answer – and keep requesting more info, again and again, until it’s clear to you that he’s not lying.

In this equation you are the verifier whose making a prover, the other participant in the interaction, jump through hoops to convince you of the validity of his claims. He can’t transmit a memory of meeting your friend from his head to yours – he’s no telepath – so answering correctly to your questions, which you’re making up on the spot, is the only way to make you believe him. This is, essentially, how ZKP works.

In the world of blockchains, a prover isn’t incapable of disclosing sensitive information; he’s just not willing to. He wants to indicate, for example, that a certain transaction has taken place and keep in secret the transaction details. He wants to establish privacy and thus ensure security.

Such level of confidentiality is precisely what Zcash, along with some other blockchain applications, is meant to provide. And after ZKP is adopted widely, experts say, the number of malicious activities on distributed networks will drastically drop.

Formal verification

Security on Blockchains: Formal verification

The smallest bug in an otherwise perfectly written smart contract can still lead to substantial losses – the Parity incident has proved that vividly.

Therefore, having a system on blockchains that checks if a piece of software does what it claims to do, and scans whether its code is buggy, would potentially prevent a great deal of smart contract hacking.

The idea behind this concept comes from math, and it is called formal verification.

Blockchain networks, huge and small ones, are now thinking to launch a piece of code that can formally verify, with mathematical proof, that other pieces of code satisfy predefined fairness properties.

Tezos, for example, a project that has recently raised over $200m via an ICO, is a smart contract technology that’s meant to facilitate formal verification.

And if it succeeds in doing so – if it creates a system that will prevent software with poorly written code from ever being deployed – that might become a game changer for the entire blockchain world.

Summing up
Decentralization has its flaws; the complete security and privacy are yet to be achieved.

It doesn’t mean, however, that blockchains are unsafe: substantial progress has been made already in the security area and clever developers keep on improving the technology on a regular basis.

The losses, which are, of course, no insignificant ones, still don’t approach even closely the amounts of money that have been stolen from centralized value storages such as banks and centralized exchanges. And, if anything, the trust in blockchains has now even grown.
Ethereum, which used to be perceived as Bitcoin’s less celebrated cousin, could soon be worth more than Silicon Valley. So there’s every reason for blockchain enthusiasts to be optimistic.

If you’d like to learn more about privacy and security on blockchains, please contact our expert – a wise and cheerful man – to get a free consultation.

The post Privacy and Security on Blockchains: What Protection Measures The Networks are Adopting to Secure their Users appeared first on Perfectial.

More Stories By Rostyslav Demush

Ross Demush is a digital marketing specialist at custom software development company Perfectial, a leading provider of web & mobile development services, specializing in FinTech, Real Estate, Media & Entertainment & eLearning.

@ThingsExpo Stories
Product connectivity goes hand and hand these days with increased use of personal data. New IoT devices are becoming more personalized than ever before. In his session at 22nd Cloud Expo | DXWorld Expo, Nicolas Fierro, CEO of MIMIR Blockchain Solutions, will discuss how in order to protect your data and privacy, IoT applications need to embrace Blockchain technology for a new level of product security never before seen - or needed.
In his keynote at 18th Cloud Expo, Andrew Keys, Co-Founder of ConsenSys Enterprise, provided an overview of the evolution of the Internet and the Database and the future of their combination – the Blockchain. Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life settle...
BnkToTheFuture.com is the largest online investment platform for investing in FinTech, Bitcoin and Blockchain companies. We believe the future of finance looks very different from the past and we aim to invest and provide trading opportunities for qualifying investors that want to build a portfolio in the sector in compliance with international financial regulations.
Leading companies, from the Global Fortune 500 to the smallest companies, are adopting hybrid cloud as the path to business advantage. Hybrid cloud depends on cloud services and on-premises infrastructure working in unison. Successful implementations require new levels of data mobility, enabled by an automated and seamless flow across on-premises and cloud resources. In his general session at 21st Cloud Expo, Greg Tevis, an IBM Storage Software Technical Strategist and Customer Solution Architec...
Nordstrom is transforming the way that they do business and the cloud is the key to enabling speed and hyper personalized customer experiences. In his session at 21st Cloud Expo, Ken Schow, VP of Engineering at Nordstrom, discussed some of the key learnings and common pitfalls of large enterprises moving to the cloud. This includes strategies around choosing a cloud provider(s), architecture, and lessons learned. In addition, he covered some of the best practices for structured team migration an...
Imagine if you will, a retail floor so densely packed with sensors that they can pick up the movements of insects scurrying across a store aisle. Or a component of a piece of factory equipment so well-instrumented that its digital twin provides resolution down to the micrometer.
No hype cycles or predictions of a gazillion things here. IoT is here. You get it. You know your business and have great ideas for a business transformation strategy. What comes next? Time to make it happen. In his session at @ThingsExpo, Jay Mason, an Associate Partner of Analytics, IoT & Cybersecurity at M&S Consulting, presented a step-by-step plan to develop your technology implementation strategy. He also discussed the evaluation of communication standards and IoT messaging protocols, data...
Coca-Cola’s Google powered digital signage system lays the groundwork for a more valuable connection between Coke and its customers. Digital signs pair software with high-resolution displays so that a message can be changed instantly based on what the operator wants to communicate or sell. In their Day 3 Keynote at 21st Cloud Expo, Greg Chambers, Global Group Director, Digital Innovation, Coca-Cola, and Vidya Nagarajan, a Senior Product Manager at Google, discussed how from store operations and ...
In his session at 21st Cloud Expo, Raju Shreewastava, founder of Big Data Trunk, provided a fun and simple way to introduce Machine Leaning to anyone and everyone. He solved a machine learning problem and demonstrated an easy way to be able to do machine learning without even coding. Raju Shreewastava is the founder of Big Data Trunk (www.BigDataTrunk.com), a Big Data Training and consulting firm with offices in the United States. He previously led the data warehouse/business intelligence and B...
"IBM is really all in on blockchain. We take a look at sort of the history of blockchain ledger technologies. It started out with bitcoin, Ethereum, and IBM evaluated these particular blockchain technologies and found they were anonymous and permissionless and that many companies were looking for permissioned blockchain," stated René Bostic, Technical VP of the IBM Cloud Unit in North America, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Conventi...
A strange thing is happening along the way to the Internet of Things, namely far too many devices to work with and manage. It has become clear that we'll need much higher efficiency user experiences that can allow us to more easily and scalably work with the thousands of devices that will soon be in each of our lives. Enter the conversational interface revolution, combining bots we can literally talk with, gesture to, and even direct with our thoughts, with embedded artificial intelligence, whic...
When shopping for a new data processing platform for IoT solutions, many development teams want to be able to test-drive options before making a choice. Yet when evaluating an IoT solution, it’s simply not feasible to do so at scale with physical devices. Building a sensor simulator is the next best choice; however, generating a realistic simulation at very high TPS with ease of configurability is a formidable challenge. When dealing with multiple application or transport protocols, you would be...
Smart cities have the potential to change our lives at so many levels for citizens: less pollution, reduced parking obstacles, better health, education and more energy savings. Real-time data streaming and the Internet of Things (IoT) possess the power to turn this vision into a reality. However, most organizations today are building their data infrastructure to focus solely on addressing immediate business needs vs. a platform capable of quickly adapting emerging technologies to address future ...
We are given a desktop platform with Java 8 or Java 9 installed and seek to find a way to deploy high-performance Java applications that use Java 3D and/or Jogl without having to run an installer. We are subject to the constraint that the applications be signed and deployed so that they can be run in a trusted environment (i.e., outside of the sandbox). Further, we seek to do this in a way that does not depend on bundling a JRE with our applications, as this makes downloads and installations rat...
Widespread fragmentation is stalling the growth of the IIoT and making it difficult for partners to work together. The number of software platforms, apps, hardware and connectivity standards is creating paralysis among businesses that are afraid of being locked into a solution. EdgeX Foundry is unifying the community around a common IoT edge framework and an ecosystem of interoperable components.
DX World EXPO, LLC, a Lighthouse Point, Florida-based startup trade show producer and the creator of "DXWorldEXPO® - Digital Transformation Conference & Expo" has announced its executive management team. The team is headed by Levent Selamoglu, who has been named CEO. "Now is the time for a truly global DX event, to bring together the leading minds from the technology world in a conversation about Digital Transformation," he said in making the announcement.
In this strange new world where more and more power is drawn from business technology, companies are effectively straddling two paths on the road to innovation and transformation into digital enterprises. The first path is the heritage trail – with “legacy” technology forming the background. Here, extant technologies are transformed by core IT teams to provide more API-driven approaches. Legacy systems can restrict companies that are transitioning into digital enterprises. To truly become a lead...
Digital Transformation (DX) is not a "one-size-fits all" strategy. Each organization needs to develop its own unique, long-term DX plan. It must do so by realizing that we now live in a data-driven age, and that technologies such as Cloud Computing, Big Data, the IoT, Cognitive Computing, and Blockchain are only tools. In her general session at 21st Cloud Expo, Rebecca Wanta explained how the strategy must focus on DX and include a commitment from top management to create great IT jobs, monitor ...
"Cloud Academy is an enterprise training platform for the cloud, specifically public clouds. We offer guided learning experiences on AWS, Azure, Google Cloud and all the surrounding methodologies and technologies that you need to know and your teams need to know in order to leverage the full benefits of the cloud," explained Alex Brower, VP of Marketing at Cloud Academy, in this SYS-CON.tv interview at 21st Cloud Expo, held Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clar...
The IoT Will Grow: In what might be the most obvious prediction of the decade, the IoT will continue to expand next year, with more and more devices coming online every single day. What isn’t so obvious about this prediction: where that growth will occur. The retail, healthcare, and industrial/supply chain industries will likely see the greatest growth. Forrester Research has predicted the IoT will become “the backbone” of customer value as it continues to grow. It is no surprise that retail is ...