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Blockchain Explained: Security and Smart Contracts

18 March 2021

With the ever-expanding world of technology, cryptocurrency, and security, we think it’s important to keep everyone up to date. Knowledge is power and keeping up with the tech world can get harder and harder.

Blockchain and smart contracts are something the team at Cyrex have been reviewing for some time. On a security level, blockchain is remarkably secure. As of today, there are no known vulnerabilities. Additionally, the operational security of smart contracts is something we believe needs to be known.

We’ve decided to take the topic of blockchain and smart contracts and break them down to make them a little more transparent for those entering or outside the tech and security industries.

What is Blockchain?

Blockchain itself is, simply put, a list of records. It’s a list of transactions and interactions which are all recorded and kept within the ‘blockchain’.

Each record, each transaction, every cryptocurrency exchange, they are all recorded. Each is given a ‘block’. When new transactions enter, they are validated and signed by the previous block. Once this is complete, it is then entered in as its own block and chained to the previous block. Hence, blockchain.

Is Blockchain secure?

The strength of blockchain is its decentralised nature. It is not owned by anyone or any individual business entity. It is simply out there. This might sound dangerous but it’s quite the opposite. Due to the connection of each user, every transaction is validated across as many machines as is available. There are rare occurrences where one user owns more than 50% of the entire blockchain network, therefore there could be a single target for malicious actors. But in most cases, you can’t really cheat a blockchain system, because there’s typically no single thing to cheat.

Instead, it’s any number of machines checking the new entry and agreeing if it’s valid and true or not. These systems are checking each entry for the proper values and for its legitimacy.

In this way, with an independent multi-system check of each entry, it is an incredibly secure system for the transactions sent through it.

What are Smart Contracts?

Smart contracts are effectively miniature programs, small pieces of code that can be uploaded to a blockchain. They are a small, custom implementation set to execute commands based on the behaviour that interacts with it.

This can be for games, like in-game marketplaces, and for many non-gaming services.

Speaking of cryptocurrency, when discussing smart contracts, we are mainly talking about the Ethereum blockchain. Most people outside the tech world might know of Bitcoin, but there are plenty of other cryptocurrencies. Ethereum is the second-largest cryptocurrency market and operates using the ‘Ether’ or ‘ETH’ cryptocurrency.

The reason we discuss mainly around Ethereum is because it is the frontrunner when it comes to using and implementing smart contracts.

These contracts operate just as a traditional transaction. But when they are executed, they use the commands within to initiate a new action or operation. Unlike sending money, the contract can be bound with different behaviour. As mentioned above, this would traditionally be an in-game or real-world transaction of buying and selling. Due to the nature of the decentralized verification, it ensures the transactions are incredibly secure.

How does Cybersecurity enter the equation?

While blockchain is very secure by its decentralized nature, it also means that once something is in the blockchain, it’s there for good. It is the very nature of blockchain security that demands security from your end as well. Once your contract is up there, it will have to be as secure as possible.

In blockchain, with its designated block and space, it will be unchangeable and accessible to anyone. If there is a weakness, it will be exploitable. This is why we heavily recommend a full source code review before uploading. There are no options for black or grey box testing in this regard, it must be a ground-up check to guarantee its security. As we mentioned, these are individual programs custom coded by developers and all it takes is one mistake. In this kind of situation, you can’t afford to miss a single line of code.

 

The world of technology moves at a staggering pace. Don’t let yourself get left behind and miss out on the potential of blockchain. And definitely don’t neglect security when getting involved.

If you’re interested in blockchain or securing your own investments and smart contracts, get in touch with us. If you’d like to learn more about the security we do, you can learn more here.