Blockchain Security Debate: 5 Tips to Protect your Assets - Huobi Talk EP 37

Security Starts with Network Architecture
One of the first decisions to make when establishing a private blockchain is about the network architecture of the system. Blockchains achieve consensus on their ledger, the list of verified transactions, through communication, and communication is required to write and approve new transactions. This communication occurs between nodes, each of which maintains a copy of the ledger and informs the other nodes of new information: newly submitted or newly verified transactions. Private blockchain operators can control who is allowed to operate a node, as well as how those nodes are connected; a node with more connections will receive information faster. Likewise, nodes may be required to maintain a certain number of connections to be considered active. A node that restricts the transmission of information, or transmits incorrect information, must be identifiable and circumventable to maintain the integrity of the system. A private blockchain underlying commodities trading may grant more-central positions in the network to established trading partners, and may require new nodes to maintain a connection to one of these central nodes as a security measure to ensure it behaves as expected.
All blockchains are not created equal
It’s important to be aware of this fact when evaluating whether the technology you’ve chosen will have the security you require. Today, there are two main types of blockchain, public and private, with a number of variations. Public and private blockchains differ in a couple of key ways that can affect the level of security they provide.

The most obvious difference is that public blockchains use computers connected to the public internet to validate transactions and bundle them into blocks to add to the ledger. Any computer connected to the internet can join the party. Private blockchains, on the other hand, typically only permit known organizations to join. Together, they form a private, members-only “business network.” This difference has significant implications in terms of where the (potentially confidential) information moving through the network is stored and who has access to it. Just from that, you can probably see how a public blockchain might not be right for enterprise. Another important and related difference is that public blockchains are typically designed around the principle of anonymity, whereas private blockchains use identity to confirm membership and access privileges, and so the participants in the network know exactly who they are dealing with.

The other main way public and private blockchains differ is how transactions are verified. Basically, for a transaction to be added to a blockchain, network participants must agree that it is the one and only version of the truth. That is done through consensus, which means agreement. Bitcoin is probably the most well-known example of a public blockchain and it achieves consensus through “mining.” In Bitcoin mining, computers on the network (or ‘miners’) try to solve a complex cryptographic problem to create a proof of work. The drawback is that this requires an enormous amount of computational power, especially for large-scale public blockchains.

Alternatively, a private blockchain consists of a permissioned network in which consensus can be achieved through a process called “selective endorsement,” where known users verify the transactions. The advantage of this for businesses is that only participants with the appropriate access and permissions can maintain the transaction ledger. There are still a few issues with this method, including threats from insiders, but many of them can be solved with a highly secure infrastructure.