Why Blockchain Could Have Mitigated the Colonial Pipeline Shutdown

News | May 20, 2021 By:

Colonial Pipeline was left without a good choice when its corporate IT network was hit with a ransomware attack by Russia’s DarkSide cybercriminal hacking group. We learned that the company then opted to shut down its operational technology (OT) network — the system that runs the 5,500-mile physical pipeline with critical fuel, one of the largest pipeline’s in the country responsible for transporting more than 100 million gallons a day.

It has been reported that a potential reason for this shutdown was that the company’s billing system was compromised, and there was no way to track fuel distribution or to properly bill for it. That, and Colonial Pipeline wanted to ensure safety and to make sure the cyber-physical hack didn’t travel into the pipeline’s operating system; or worse, beyond into the company’s process control network and that of its suppliers.

Ultimately, even after the shut-off, Colonial Pipeline paid $4.4 million in ransom to get the keys necessary to decrypt their data and resume operations.

Had the company been using blockchain-backed smart contracts to automate its commercial transactions, such as billing, each transaction would have been stored in a distributed ledger that was shared among trading partners. If any single part of the network went down, it could have been reconstituted from other parts of the network to create a self-healing infrastructure to be back up-and-running in under 24 hours, avoiding the need for a prolonged shutdown.

With distributed ledgers, a cyberattacker must compromise every copy of the ledger in multiple company’s environments in order to hold any particular piece of data ransom, greatly increasing the effort required by a hacker and mitigating the risk of one or two participants being compromised. While many details are still to come in regards to this particular hacking event, it will catalyze more companies to take a hard look at their current business systems and undertake stronger risk mitigation strategies to combat the ploys of sophisticated cybercriminals.

Quick recovery is paramount (as many East Coast who waited in line for gas can attest) to minimize impact on business operations. Automated transactions with blockchain-backed smart contracts create not only efficiency, accuracy and savings, but also guard against any single point of failure (like the billing network issues cited as the reason for the shutdown).

Any system that utilizes blockchain-backed smart contracts, be it for billing, provenance, real-time financial insights or even environmental, social, governance (ESG) monitoring, has the capability to mitigate risk and help protect critical infrastructures exposed to cyber threats, making blockchain an integral component to fuel business continuity and speed recovery after any disaster.

It should never be considered an if in regards to a data breach or hack but a when and to what degree a nefarious party is capable of infiltrating a network. As more comes to light about this particular incident, specific technologies and recovery plans will become more of a critical focus in the conversation to protect global businesses. Blockchain-backed smart contracts stand to play a strong role in the preservation of critical infrastructures’ functioning in the midst of increasingly sophisticated cyberattacks.