Blockchain can be central to national security in the future. In the wake of the crypto-crash, we must not over react and over regulate the still new and potentially revolutionary technology
Cryptocurrencies have had a bad few months. As the price of Bitcoin tumbled to under the significant psychological threshold of $20,000, shares of one of the largest crypto exchanges, Coinbase, crashed by more than 81% in the first six months of 2022. A host of currencies with baffling names and dubious hawkers were revealed as lacking completely in value. Overall, more than $2 trillion has been wiped from the crypto market in just 6 months.
Regulators have belatedly taken note. Whilst few governments were as bullish as El Salvador, which legalised bitcoin as legal tender, a bet which does not appear to be paying off as well as anticipated, most had been content to let the good times roll. Now, as prices crash and pockets start to hurt, a decidedly more hawkish tone has emerged. On Thursday, the Treasury announced that the US and its allies must cooperate to create shared standards for regulating cryptocurrencies. The Bank of England and the Fed have both echoed this desire.
There is no doubt that there has been significant skulduggery in the crypto-market. However, it is crucial that the classic pattern of initial under-regulation and then zealous over regulation is not repeated. There is a real danger that the phenomenal ground-breaking and – above all – inherently useful technology of blockchain is tarred by association with the cryptocurrency fad.
Blockchain is the underlying technology behind bitcoin, but cryptocurrency is perhaps the least impressive application of its potential. It works by storing chunks of information as “blocks” that are added to a transactional “chain”. Crucially, this information is not stored at a central location but distributed across a network of computers nodes for verification. The information can only be added to the chain upon being verified by all other nodes in the network. When added to the chain, a detailed record of the transaction is also stored. This characteristic makes blockchain incredibly secure – data stored in this way is difficult to forge and alter whilst being easy to trace. These qualities have led to blockchain being labelled the most important invention since the internet.
Smart use of blockchain could have enormous positive consequences in national security in particular. Warfare is rapidly changing with increased importance being placed both on the control of information and the contestation of cyber-security. On Thursday, James Bowder, the British Army's head of "Futures", laid out how a future war in Europe will be won or lost through the ability to communicate securely. Without this, soldiers will either become sitting ducks for enemy artillery or be unable to identify enemy locations themselves. This is especially relevant when one considers that the one adversary that most delights in spreading false orders and information during war is the most likely enemy in any European conflict. During the most recent Russian invasion of Ukraine, and in the initial stages of the invasion, fake messages were distributed claiming that President Zelensky had surrendered, aiming to demoralize from the very start those Ukrainians fighting for their country’s freedom.
Across the Atlantic, cyber-security is rightly considered vital in protecting national security assets. It is frightening how often critical defence assets are exposed to cyber-attacks. In 2018 the Department of Defence found gaping cyber vulnerabilities in 86 weapons systems under development. In 2010, the U.S. Air Force shockingly lost contact with a silo of 50 Minuteman III ICBMs Wyoming for an hour. Without urgent improvement, it is a question of when and not if a rogue actor will succeed in breaching national cyber-security. Again, this is a tactic that the current most pressing threat to the US – Russia – has used before. Forbes has catalogued a 20-year campaign of systematically increasing cyber-attacks against the US. It is not hard to see it coming.
In both of these key areas – information trustworthiness and cyber-security– blockchain has the potential to be a game changer. Blockchain information is inherently validated by all other nodes in the network – a solider receiving an order or information through blockchain knows it can be trusted and acted upon. To overwhelm the network is almost impossible as has been demonstrated even throughout the crypto crisis, when millions of anxious investors executing transactions couldn’t crash the exchange. For the same reasons, blockchain technology is very difficult to hack.
Blockchain’s potential is not just in enhancing our defence against known threats but also has vast possibilities for cutting edge offensive technology that appears to almost be out of a science fiction novel. Blockchain has been noted as being a possible method to, for example, control semi-autonomous “swarms” of armed drones, with each drone serving as a node contained within the chain.
The Western defence community is aware of the potential. The Department of Homeland Security has funded schemes to begin exploring the possibilities offered by blockchain. However, and with all due respect to government contractors, the value that nimble and smaller outfits bring to the table should not be discounted. The strength of its private sector and its ability to innovate has always been the secret weapon of the West and allowed it to maintain a technological edge over rivals.
This is the danger of over regulation of the blockchain space – that overeager regulators, spurred by growing public dislike of Bitcoin and cryptocurrencies, begin to clamp down on blockchain completely outside of the walled garden of government contracting. To tie one’s hand behind their back during this protracted period of technological competition in nation security that is looming would be a long-term disaster for the West. As such, clever and smart regulation that allows small private companies the ability to innovate and take risks with blockchain is needed.
Sam M. Hadi is a graduate of Trisakti University in Jakarta where he studied management. He is now working as a freelance columnist, foreign policy analyst for North Africa and crypto investor based out of Jakarta.
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