Will this promising distributed ledger technology transform cybersecurity?
Blockchain is making headlines lately – but what is it and what does it do? For the uninitiated, blockchain is a distributed public ledger technology used primarily for transactions. The blockchain has no central authority but instead participating computers exchange transactions in the ledger shared over a peer-to-peer networks. Each node in the chain keeps a copy of the ledger, and can trust others’ copies of it because of the way they are signed, making it tamper-proof and secure.
What is driving the hype?
“Blockchain allows for fast, secure and transparent transactions directly between people, businesses and machines, instead of through third party intermediaries. As a result, Middle East organisations can find quick ROI thanks to leaner, more efficient, and more profitable blockchain process,” says Kashif Al Aziz, Head of Financial Services, SAP MENA.
While blockchain is being bandied about as a revolutionary way of creating distributed, unchangeable record of transaction, some question this technology’s relevance to enterprises, which typically rely on centrally managed databases to secure digital records. However, many companies are jumping on the blockchain bandwagon and major IT vendors such as IBM and Microsoft have thrown their weight behind this technology. For example, IBM offers a cloud based service to allow developers to set up blockchain networks and test and deploy related apps.
Waqas Mirza, MD of Avanza Solutions, says blockchain is not a totally ground-breaking technology, since it combines numerous already existing concepts, such as distributed systems, peer-to-peer networks, asynchronous cryptography and cryptographic signatures. But the inherent framework that enables consensus among participating parties and the fact that data once stored in a ledger can never be tampered with is plugging a big hole in security and efficiency that software communities all over the world face today. The hype is being driven by the sheer demand of blockchain based platforms to address current gaps and inefficiencies.
Mohammed Alsehli, founder and CEO of ArabianChain, says blockchain is now more of a reality than hype and its benefits are already being recognised by organisations in the region. “Dubai, for instance, has adopted a blockchain strategy to achieve a high degree of efficiency in government transactions and aims for the government to become paperless by shifting all transaction to blockchain. Saudi Arabia is also following a similar vision.”
Niraj Vedwa, global head – banking, payment and cards, Tech Mahindra, adds that the technology has already proven its viability through bitcoins and other cryptocurrencies. “The technology is seen to be fundamentally changing some of the key processes across industries – cross-border payments, KYC in banking, land registry for government, trade settlements and identity management, to name a few.”
Is blockchain good for security?
Blockchain is a peer-to-peer network that allows multiple parties to transfer value in a secure and transparent way. As there is no third-party involvement, two parties can make the exchange without oversight or intermediation, strongly reducing or even eliminating counterparty risk,” says Tabrez Surve, Regional Head of Security, Middle East,Turkey & Africa of F5.
Alsehli agrees: “Blockchain has security in-built in its design; it is a distributed and decentralised system where the data is encrypted using public and private keys. Any chain command is sent to the ledger will require consensus. All the parties participating in writing, maintaining this ledger has to agree before they add anything to it.”
As any company with a big database knows, hackers love going after sensitive information. If a blockchain is used to store confidential contract information or payment data, then replicating the file could potentially offer hackers more places to get their hands on it.
“Blockchain is an embryonic technology that is not completely understood, and even by supposed experts. As such, it presents a new attack surface which has resulted in several high-profile, large thefts from blockchain systems,” says Paul Obsitnik, VP of product line marketing, Juniper Networks.
Blockchain isn’t without other problems and faces scalability issues. Blockchain-based transactions can cost a lot in hardware and energy, and consensus approval of each transaction takes about 10 minutes. This kind of performance doesn’t necessarily compare well to competing technologies.
In February, 40 of the world’s largest banks conducted a trial of five blockchain technologies, including Ethereum, a public block chain platform, as well as blockchains from Chain, Eris Industries, IBM, and Intel.
Ethereum claims to take only 17 seconds to process a transaction, while a San Francisco-based startup, Safe Cash, announced that it can process a transaction in under five seconds — and can handle up to 25,000 transactions per second.
But getting to that point could be extremely difficult, says Larry Tabb, founder and CEO at Tabb Group.
Even if blockchain technology does prove to have advantages over other modern systems, there are still issues of compliance, regulations and enforcement that will need to be addressed.
For example, centralised utilities often have to comply with rules about what kinds of public access they provide to their systems. Do groups of companies setting up private blockchains have to comply with the same rules?
Other regulatory issues include clarity over jurisdictions and how to comply with know-your-customer and anti-money laundering laws.
There’s also a large network effect associated with some platforms. For example, according to Autonomous Research, card networks currently process around 2,000 transactions per second and do so very cheaply, meaning that merchants have little incentive to switch.
Finally, one unintended consequence of full automation is the lack of circuit breakers. The current settlement process provides more opportunity to hit the brakes if something goes wrong.
According to the “Future of Apps’ report commissioned by F5, the blockchain momentum hinges on significant technological advances, including edge computing and 5G. “As blockchain represents a shift to a decentralised network, it will require the buy-in of both users and operators. Initial implementation expenditure is also a factor for many, despite the potential for time-and cost-savings further down the line,” says Surve.
Mirza from Avanza says the global uptake of blockchain solutions will see a spike when adoption reaches a certain critical mass. A certain number of organisations and consortiums will have to create a critical mass of adoption so that other organisations and entities can connect to these platforms and start contributing. The technology has to be widespread to a level that its technicians and experts are easily available and can guide organisation on not just how best to use this technology but also address post implementation issues.
“It could be decades before blockhain becomes commonplace, although bitcoin is a clear example of a successful, widespread uses of the technology today. What’s more, a new technology such as blockchain does provide a way for technology laggards to leapfrog existing technologies that may be widespread in the developed world,” sums up Obsitnik.