Blockchain can be central to national security in the future. In the wake of the crypto-crash, we must not overreact and overregulate the still new and potentially revolutionary technology
Cryptocurrencies have had a bad month. As the price of Bitcoin fell below the significant psychological threshold of $20,000, the 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 confusing names and dodgy peddlers have proven to be utterly lacking in value. Globally, over $2 trillion was wiped out of the crypto market in just 6 months.
Regulators have belatedly taken notice. While few governments were as optimistic as El Salvador, which legalized bitcoin as legal tender, a gamble that does not appear to pay as well as expected, most had been content to let the good times roll. Now, as prices plummet and pockets start to hurt, a decidedly more hawkish tone has emerged. On Thursday, the Treasury announced that the United States and its allies should cooperate to create common standards for regulating cryptocurrencies. The bank of england and the fed both echoed that desire.
There is no doubt that there has been a major scam in the crypto market. However, it is crucial that the classic pattern of initial under-regulation and then overzealous regulation does not repeat itself. There is a real danger that the phenomenally revolutionary and – above all – intrinsically useful blockchain technology will be marred by association with the cryptocurrency fad.
Blockchain is bitcoin’s underlying technology, but cryptocurrency is perhaps the least impressive application of its potential. It works by storing bits of information as “blocks” that are added to a transactional “chain”. Basically, this information is not stored in a central location but distributed over a network of computer nodes for verification. Information can only be added to the chain after it has been verified by all other nodes in the network. When added to the chain, a detailed record of the transaction is also stored. This feature makes the blockchain incredibly secure – data stored in this way is difficult to tamper with and alter while being easy to trace. These qualities have led to the qualification of the blockchain as most important invention since the internet.
Clever use of blockchain could have huge positive implications for national security in particular. Warfare is changing rapidly with an increased emphasis on both controlling information and challenging cybersecurity. On Thursday, James Bowder, head of British Army Futures, explained how a future war in Europe will be won or lost through the ability to communicate securely. Without it, soldiers will become sitting ducks for enemy artillery or be unable to identify enemy locations on their own. This is particularly relevant when one considers that the adversary who delights most in spreading false orders and false information during war is the most likely enemy in any European conflict. During the most recent Russian invasion of Ukraine, and in the early stages of the invasion, false messages were distributed claiming that President Zelensky had surrendered, aimed at demoralizing Ukrainians who are fighting for the freedom of their country from the start.
Across the Atlantic, cybersecurity is rightly seen as vital to the protection of national security assets. It is frightening how often critical defense assets are exposed to cyberattacks. In 2018, the Ministry of Defense found gaping cyber vulnerabilities in 86 weapon systems under development. In 2010, the US Air Force shockingly contact lost with a silo of 50 Minuteman III Wyoming ICBMs for one hour. Without urgent improvement, the question is when, not whether, a rogue actor will succeed in breaching national cybersecurity. Again, this is a tactic that today’s most pressing threat to the United States – Russia – has used before. Forbes cataloged a 20-year campaign of systematically increasing cyberattacks against the United States. It’s not hard to see it coming.
In these two key areas – information reliability and cybersecurity – blockchain has the potential to be a game-changer. Blockchain information is inherently validated by all other nodes in the network – a soldier receiving an order or information through the blockchain knows they can be trusted and act on it. Overwhelming the network is nearly impossible, as has been demonstrated even throughout the crypto crisis, when millions of anxious investors executing trades were unable to crash the exchange. For the same reasons, blockchain technology is very difficult to hack.
Blockchain’s potential is not only to strengthen our defense against known threats, but also offers vast possibilities for cutting-edge offensive technology that almost seems like something out of a science fiction novel. The blockchain has been noted as being a possible method to, for example, control semi-autonomous “swarms” of armed drones, each drone serving as a node contained in the chain.
The Western defense community is aware of the potential. The Department of Homeland Security has funded schemes to start exploring the possibilities offered by the blockchain. However, and with all due respect to government contractors, the value that smaller, nimble companies bring to the table should not be underestimated. The strength of its private sector and its ability to innovate have always been the West’s secret weapon and have allowed it to maintain a technological lead over its rivals.
This is the danger of over-regulation of the blockchain space – that overzealous regulators, spurred on by the public’s growing aversion to Bitcoin and cryptocurrencies, begin to clamp down on blockchain entirely outside the walled garden of government contracts. To tie our hands behind our backs during this protracted period of looming technological competition for national security would spell long-term disaster for the West. As such, smart and smart regulation that allows small private companies to innovate and take risks with blockchain is needed.
Sam M. Hadi graduated from Trisakti University in Jakarta where he studied management. He now works as a freelance columnist, North Africa foreign policy analyst and crypto investor based in Jakarta.
This article was submitted by an external contributor and may not represent the views and opinions of Benzinga.