Understanding and managing blockchain network risks are important to blockchain security. Considering the risk, it is essential to implement security protocols to ensure that all appropriate measures are in place.
Table of Contents
- Identity and Access Management (IAM)
- Key Management
- Two-Factor Authentication
- Anonymity vs. Pseudonymity
- Best Practices in Securing Crypto
Identity and Access Management (IAM)
Identity and access management (IAM) pertains to a framework of policies that ensures only the right users or employees will have proper access to assets and resources. This includes roles and permissions, as well as safeguarding such permissions from malicious third-party entities. By having an appropriate IAM, unauthorized persons will not be able to access data that can potentially compromise the user’s or their organization’s assets.
Identity access management (IAM) framework
Key management is a process that puts a set of guidelines in place to secure cryptographic keys within an organization. This includes key generation, storage, usage, and key liquidation and replacement. The cryptographic keys of crypto assets are the pillars of blockchain security. If the keys get compromised, the assets will also get compromised. The best practices for handling keys include the following:
- Avoiding hard-coding keys
Hard-coding pertains to having a single source of code in generating keys.
- Least privileged concept
This idea suggests that users or employees should only have access to keys that are completely necessary for their work, thus ensuring authorization in accessing vital assets within the organization.
- Separating the duties of key management
This pertains to having different persons doing tasks during the cycle of key management (e.g., person A will handle key generation while person B will oversee key storage, etc.)
- Splitting keys
This will ensure the maximum security of the keys within an organization. Splitting keys can be done in two ways:
- The organization splits the different parts of the key among different persons within the organization, thus delegating access to separate entities.
- The user stores different parts of the key in different places (e.g., one part of the key is written on a piece of paper, the other part is saved in a flash drive, etc.).
A protocol for deploying, managing and discarding keys
Two-factor authentication (2FA) is a crucial yet often overlooked step in securing assets and everything that requires a username and password. 2FA provides an additional layer of security during the authentication process. Even if the password gets compromised, the exploiter will need to bypass the 2FA set by the actual owner of the account or wallet. There are different types of 2FA, which include the following:
- SMS verification
This will exponentially secure the account or wallet compared to just using a password. However, it can be compromised through SIM jacking.
- App-generated codes
Examples of apps that can generate codes for 2FA include Google Authenticator and Authy.
- Physical authentication keys
This pertains to using physical Universal 2nd Factor (U2F) tokens to secure wallets or accounts.
Theoretically, even if the user enters a phishing site, it will not be able to capture the 2FA code saved in the user’s USB drive.
- Email-based authentication
This utilizes the email address used during the registration process of the site, wallet or crypto exchange. Binance uses this type of 2FA along with SMS verification and app-generated codes.
A 2FA system for login verification
Anonymity vs. Pseudonymity
Anonymity and pseudonymity provide an entirely new level of protection against threats that are different from the conventional type of blockchain hazards. In principle, users of blockchain technology are anonymous by default because the individual wallets are not labeled with the owners’ identities. However, this anonymity doesn’t give enough protection against doxing and tracking, and this is where pseudonymity comes into play. Pseudonymity gives a sense of “self-sovereignty” in crypto, as it provides another layer of personal privacy for a user’s security.
A tweet from a Twitter thread by Yield Guild Games (YGG) co-founder Owl of Moistness on the topic of pseudonymity
Best Practices in Securing Crypto
Maximizing the security of cryptocurrencies and blockchain assets requires careful attention to best practices. From using secure passwords to enabling two-factor authentication, every step counts in keeping digital assets safe. Staying informed and proactive is the key to safeguarding valuable crypto assets.
- As much as possible, store your keys and assets offline. Storing your keys and assets online puts you at greater risk of a security breach. The only risk to using cold storage like a hardware wallet is the probability of accidentally losing it.
Trezor and Ledger are the most popular hardware wallets in the market. Trezor is compatible with a lot of web3 wallets, but Ledger stores more types of crypto when compared to Trezor. Depending on their needs, the user can choose either of the two.
- Use a form of encryption to protect your assets. Encrypting your hardware wallets, flash drives, devices, and accounts will further reinforce the security of your assets besides having a password and 2FA.
AxCrypt is one of the most popular encryption tools in the market. It offers public key cryptography for sharing of encrypted files.
CryptoForge offers context-menu-based encryption and secure deletion. It also handles text-only encryption.
- When handling large amounts of assets, use insurance solutions. Applying the best practices in securing your assets won’t completely eliminate your chances of experiencing a security breach, so it’s best to cover all your bases by signing up for insurance.
Coincover is a popular insurance solution that utilizes unique technology in securing assets. It prevents exploitation and fraud by analyzing on-chain data in the blockchain, compensates users in an event of an exploit, and backs up private keys for easy recovery.
- Spread your assets across multiple platforms. If you store your assets in a single location, you could lose all of them in one fell swoop. Spreading your assets will decrease the risk of losing them in a single exploit.
This principle can also be applied to trading. Spreading your investments will decrease the risk exposure of your assets in a volatile market.