Bitcoin Q&A: Can cryptocurrencies support terrorism?
Remember when we were excited about The Cloud? Today, internet storage space is an assumed amenity for many of us.
Now it’s time to look toward Blockchain. It’s something you might have heard of, but you might not know much about it.
Who is interested in blockchain?
Blockchain technology represents an innovative leap forward that has many uses and applications across multiple sectors of the economy.
Many people, organizations, companies and departments are increasingly excited about blockchain.
So, is it potentially relevant to the homeland security enterprise (HSE)? If so, what needs to be proven before its use and adoption by the federal government?
In its role as the science advisor to the Department of Homeland Security, the Science and Technology Directorate (S&T) is well-positioned to answer these questions.
S&T is taking the lead with research and development projects in this area to determine viable uses for the technology.
What is blockchain?
In short, blockchain powers the engine that drives Bitcoin’s digital currency’s transaction confirmation process.
The technology provides a level of independently verifiable tracking and transparency for every exchange of the digital monies involved.
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For each transaction, another “block” of transaction information is added to a public ledger on a shared database. So, if someone wanted to track the history of a particular unit of digital currency, they could.
Gone are the concerns of “version control.” The blockchain process and database are touted as secure and tamper-proof and the technology is highly resistant to hacking and data modification.
How did blockchain begin?
In 2008, an obscure technical paper titled Bitcoin: A Peer-to-Peer Electronic Cash System proposed a revolutionary mechanism to solve a growing problem within the transfer of digital currencies—fraud. When using a peer-to-peer network, preventing double-spend became extremely complex.
The lack of transparency within the system only added to the challenge.
Since transactions were through peer-to-peer networks, there was not a centralized bank to coordinate and monitor every transaction of the electronic monies. Nor was there a way to stop all illegal duplication of the digital monies, which could be spent multiple times.
Not only was it hard to prevent, it was hard to find the digital paper-trail of wrongdoing.
The article was published by an anonymous individual or group—no one knows which—that goes by the name of Satoshi Nakomoto.
The proposed mechanism combined something as old as recordkeeping—a ledger—with an innovative mechanism for reconciling the transactions in that ledger without using a trusted, centralized bookkeeper.
It did so by replacing that trusted bookkeeper with a set of crowd-sourced entities who were incentivized to reach consensus on the state and order of the transactions in the ledger.
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Their “incentive” was they got paid in Bitcoin for their work. This combination of a “distributed electronic ledger” and the associated incentive structure (which makes the Bitcoin digital currency possible) is called the blockchain.
What does blockchain do?
Blockchain transparently stores all the information about every transaction involving the Bitcoin cryptocurrency so the same Bitcoin cannot be spent more than once.
As of late, the term blockchain has taken on near mystical overtones.
Some have called it the “second generation of the Internet,” with proponents claiming it will enable everything from letting users police the monetary system to providing unlimited communication channels.
Some even assert it will replace lawyers via the use of smart contracts.
In fact, advocates say blockchain’s potential uses extend far beyond its original application and are nearly limitless. They contend its uses encompass almost any transaction involving money, goods and property, while reducing fraud because blockchain records all transactions on a public ledger, which can be viewed by anyone.
With interest growing, spending on further development of blockchain technology in the finance, business, government and public sectors rose dramatically in 2015.
The financial services sector alone spent $75 million developing the technology for its uses, while angel investors and venture capitalists invested another $180 million in blockchain startups last year.
Blockchain and S&T?
Cutting through the sensationalism associated with such a product, S&T sees the reality of blockchain’s promise. The technology presents intriguing possibilities with associated far-reaching benefits that may be relevant to the HSE, such as:
- No central authority needed to reconcile the ledger
- Parties in the transaction do not have to trust each other
- Immutability of records after reconciliation
The wide gap between the hype and the reality requires proving if security and privacy controls can be supported or enabled by blockchain and whether the benefits of adopting the technology outweigh the pain of incorporating it into a proven information technology environment.
If in fact the security and privacy claims of blockchain’s advocates can be proven to be valid, there are some interesting HSE use-cases that could be enabled by this technology, including:
- Sharing of emergency responder credentials across federal, state, local, tribal and international borders by authoritative parties with no single point of failure
- Creating immutable records and audit logs of data that cannot be spoofed and can be publicly verified without revealing personally identifiable information
- Improving traveler experience in airports by reducing redundant checks
- Reducing fraud in the transfer of goods across international boundaries that touch multiple entities who do not trust each other
With such potential, proving the security and privacy aspects is precisely where S&T currently is focusing its resources.
It is doing so via Small Business Innovation Research projects to investigate the various capabilities of blockchain. This includes security and privacy characteristics as well as exploring its immutability, data integrity and anti-spoofing aspects via a Silicon Valley Innovation Program project.
If these research projects bear fruit, S&T will begin developing ways to implement blockchain technology to better safeguard the American people, our homeland and our values.