Blocking and Tackling: Why the Blockchain Matters for National Security

By Alex Waters and Angela Jeffrey

The blockchain is often cited, mistakenly, as a panacea for many ills facing society. This confusion is understandable, stemming as it does from the extraordinary growth experienced in the crypto-asset industry, which seems to morph and change direction as fast as people can study its effects. A variety of concepts have emerged to explain what a blockchain is and why it’s important, but it can perhaps best be thought of as a public ledger.

Imagine if you will a giant piece of paper that exists on the internet. People can record information on this piece of paper, but there is a catch: they can write only in ink and they can't cross anything out. This ledger lasts forever and is globally available online. Anyone can view it at any time. That is the essence of a blockchain: an immutable public ledger for recording information.

In practice, it is a series of messages, or transactions, that get broadcast online and then cemented into “blocks” by a special class of network participants known as miners, who confirm the validity of every transaction. Each new block points to the one that came before it, and so blocks are connected in a chain stretching back to the genesis of the network. This chain preserves all of the valid transactions—those that didn’t break the network protocol rules—and which paid the required toll to be entered permanently in the historical record.

Image: Financial Times

Image: Financial Times

So far, the conversation around blockchain technology has been dominated by the finance industry, with applications for other fields, such as health care, only now beginning to emerge. The defense industry, too, has been left on the sidelines. And yet blockchains promise to give those agencies tasked with defending national security powerful new tools even as they may pose new problems and make that task more difficult than before.

The sooner lawmakers and military leaders understand the new reality, the more intelligently they will be able to pass new laws, craft new regulations, and amend old ones; and the more rationally they will be able to respond to the real and present dangers of a rapidly changing world—a world that is just beginning to set its watch by “blockchain time.” Indeed, there are a number of uses for blockchain technology that are relevant to national security. They include making supply chains more efficient and transparent, powering secure and plausibly deniable communication channels and exposing black market activities such as cyber-extortion.

The Department of Homeland Security has stated, “Securing the global supply chain, while ensuring its smooth functioning, is essential to our national security and economic prosperity.” Global supply chains are increasingly complex, yet they are hampered by legacy in-house systems, reliance on paper records and other inefficiencies. Bitcoin’s blockchain and others would ensure that data is reliable and publicly available and that custody chains are transparently recorded, making it easier to authenticate goods and track shipments from start to finish. In Walmart's first experiment with a blockchain, conducted with IBM in 2016, the company was able to cut a six-day produce-tracking procedure down to just two seconds. In late April 2018, Walmart received approval for two patents regarding a means for using blockchain technology to automate payments to producers and logistics suppliers.

It remains to be seen whether suppliers will get onboard. But the benefits are clear. As the U.S. House of Representatives Subcommittee on Digital Commerce and Consumer Protection heard in March 2018, blockchain solutions for supply chain management would enhance transparency, increasing trust and making product recalls more precise. Transparency is especially needed with diamonds and other commodities that could have a questionable provenance. To that end, IBM recently announced the pilot of TrustChain, a first-of-its-kind blockchain network designed to track and authenticate diamonds and precious metals from mine to market. “This initiative is important for our industry as we seek to raise the collective responsibility and provenance practices to new heights,” said Mark Hanna, chief marketing officer of jewelry maker Richline Group, one of IBM’s partners in the initiative. Diamond purveyor De Beers announced in January 2018 that it was piloting a similar blockchain program to ensure that all of its diamonds were natural and did not originate in conflict zones.

Blockchains could also enhance the security of global supply chains, an increasingly urgent need in an era when the shipping industry has suffered at the hands of industrial-scale cyber attacks. Increasing the resiliency of data by leveraging the cryptographic strengths and decentralized nature of blockchain technology would harden the supply chain considerably.

Increasingly, the private sector is recognizing this potential and mobilizing to use blockchain technology in a variety of businesses. In 2017, IBM announced a major blockchain collaboration with Dole, Driscoll’s, Golden State Foods, Kroger, Unilever, Walmart and other manufacturers and retailers to address food-safety concerns. Currently, one in 10 people fall ill and 400,000 people lose their lives from contaminated food each year, and it takes weeks to identify the point of contamination, causing lost revenue, wasted product and increased risk of illness. Frank Yiannas, vice president of food safety at Walmart, explained that blockchain technology “enables a new era of end-to-end transparency in the global food system—equivalent to shining a light on food ecosystem participants that will further promote responsible actions and behaviors. It also allows all participants to share information rapidly and with confidence across a strong trusted network.”

Such solutions are still in their infancy. Nevertheless, the impact that these new technologies can have on logistics and supply chain management is generating considerable excitement. While much of the innovation today is happening in the food industry, it is relatively trivial to project these solutions into other areas of interest to national security—facilitating and managing the transfer of sensitive materials between organizations or government branches, for instance, or tracking the provenance and travel routes for goods, supplies, weapons and even people, while programmatically generating reliable, detailed and real-time reports. Automating these processes in a secure, trusted and highly reliable way would save time and money and might achieve a more efficient government infrastructure.

Blockchains can also underpin the next generation of secure communications technology. In 2012, Jonathan Warren published the whitepaper for Bitmessage, a peer-to-peer message authentication and delivery system that bridges the gap between the ease of use of email and the security of email-encryption software, while also hiding the message metadata from prying eyes. To communicate, Bitmessage users exchange addresses, which are alphanumeric strings or QR codes, not unlike email addresses. Encrypted messages are exchanged using a mechanism similar to that of bitcoin transactions. While all users receive all messages, only the intended recipient is able to decrypt a given message using his private keys. The distributed, decentralized nature of the network protects all participants in such a chat service from vulnerabilities inherent to centralized messaging services such as WhatsApp and Telegram. It also makes messages highly available and provably secure.

These secure messaging systems have attracted the interest of the U.S. Defense Advanced Research Projects Agency (DARPA), which announced in 2016 that it was looking to partner with blockchain companies that could build the agency an unhackable messaging platform. At the same time, tools for sending encrypted messages via distributed systems are becoming available to the general public.

Newer blockchains, such as Ethereum, may have an edge over Bitcoin in that they provide advanced functionalities such as standardized smart contracts. These automated contracts enable exchanges (atomic swaps) without involving a trusted third party, and thus can effectively guarantee payment for successfully delivered data or services. Such systems can thus be used to facilitate the commissioning of and payment for crimes while avoiding detection. Researchers at Cornell University published a paper in 2016 demonstrating how smart contracts could enable illicit payment for criminal activities such as copyright infringement (e.g., the pre-release of a stolen Hollywood film), key theft (e.g., decryption of a target’s file using the stolen key), and murder- or arson-for-hire (for which authenticated news reports of the crime can trigger payment).

The ability to commission and guarantee payment for crimes through crypto-powered smart contracts is a development that law enforcement needs to consider thoughtfully as it examines the use of emerging technologies in black markets. Bitcoin’s ability to transfer large sums of money to pseudonymous wallets on a decentralized network has made many individuals and cryptocurrency exchanges the targets of extortion and elaborate phishing scams. While various mechanisms exist in the traditional financial system for halting or reversing large transfers made under duress, currently there are no ways to halt or reverse a bitcoin transfer, making such extortion attempts far more enticing for criminals.

We are seeing the dawn of a new era. Blockchain technology has opened up new frontiers for thought and expanded the horizons of what is possible with computer science and applied cryptography. Growing adoption of Bitcoin and of other blockchains, both public and private, will create a new security context for communications, the movement of money and human organization. As new and compelling use cases present themselves, it is imperative that individuals charged with preserving our nation’s security take proactive measures not only to understand how this technology functions and is evolving, but also to help shape that evolution in a way that will transform this dawn into a bright and positive day.