Government Agencies Adopting Bitcoin and Blockchain Technology

Cyber warfare is an emerging new threat that can be used to achieve strategic superiority, destabilize states, and cause large-scale economic damage. Breaches of sensitive data, mass disinformation campaigns, cyber-espionage and attacks on critical systems can affect individuals, businesses and governments.

Until recently, cyber-espionage was mostly used by large corporations with the goal to gain an unfair advantage over their competitors. The main risks, from a business perspective, were intellectual property infringements, disclosure of trade secrets, and economic espionage.

But now government organizations are looking very closely at the potential of blockchain, as a technology to build systems that will prevent data theft and tampering and provide secure communications.

Our take: High-profile attacks, such as those against the German Parliament in 2015, against Chancellor Angela Merkel’s Christian Democratic Union party in 2016, or against the US Democratic National Committee are a clear sign that politically-motivated cyberattacks are gaining in scale, hostility and sophistication. In 2016, the United States accused Russia of cyberattacks against the Democratic National Committee in order to interfere with the outcome of the US. Presidential election, while media reported a record year for data breaches.

Cyberattacks are a growing problem for western countries and the timeline below shows us just how big the problem really is:

• December 2015 & December 2016 — Power grid in Ukraine: 230,000 people were left without power for up to 6 hours. Its the first time that a cyber-weapon was successfully used against a nation’s power grid.
• February 2016 — Central bank of Bangladesh: USD 81 million were lost and a further USD 850 million in transactions were prevented from being processed.
• February 2016 — FBI and Homeland Security: Personal details of over 20,000 employees of the Federal Bureau of Investigation and 9,000 of the Department of Homeland Security were accessed.
• April 2016 — Philippines’ Commission on Elections (COMELEC): Personal information of every single voter in the Philippines, approximately. 55 million people.
• April 2016: Democratic National Committee Publication of 20,000 e-mails stolen from the Democratic National Committee.
• October 2016 — Domain name provider Dyn: A distributed denial of service attack resulted in the break-down of some of the biggest websites in the world including Twitter, The Guardian, Netflix, Reddit, Airbnb and CNN.
• October 2016 — Australian Red Cross: Personal data of 550,000 blood donators stolen.
• November 2016 — Deutsche Telekom: 900,000 people suffered Internet outages over two days.
• November 2016 — Tesco Bank: Around £2.5 million was stolen from around 9,000 customers in this hack, the largest on a UK bank.
• November 2016 — NHS hospitals: Hospital machines were frozen to demand ransom cash. At least four NHS funds were attacked.
• November 2016 — Yahoo: Data breach of 1 billion accounts.

The cost of cyberattacks is enormous. A 2014 study estimated the economic impact of cyberattacks in the European Union to be around 55 billion euro, with Germany being most affected. The study forecasts that the economic cost of data breaches globally will quadruple by 2019, reaching 2 trillion euro, almost four times the cost of 2015.

A recent memo by the Foundation for Defense of Democracies outlines several potential scenarios in which outside forces attack or infiltrate America’s national security industrial base.

The US. government apparently sees the potential in blockchain technologies. This past May, the Department of Homeland Security (DHS) listed several blockchain companies that received innovation grants.

An article in the Washington Times suggests that the Pentagon and NATO have been exploring blockchain technology as cybersecurity shield.

A few decades ago, the Defense Advanced Research Projects Agency (DARPA) helped create the Internet and now its exploring how blockchain can help create a secure messaging platform, that will eventually be used for communications in the battlefield.

Cybersecurity relies on secrets and trust to maintain security, but neither can be guaranteed. Blockchain operates independent of secrets and trust. Its a shared, distributed, tamper-resistant database that every participant on a network can share, but that no one entity control. Blockchain can preserve the “truth” in couple of ways. First, it ensures that digital events are widely witnessed by transmitting them to other nodes on the blockchain network. But it also use consensus. These events are secured in a database that can never be altered. Blockchain enhances the cyber defense’s perimeter, not by helping to hold up the walls, but by monitoring the walls and everything within them.

Blockchain provides a fundamentally different approach to cybersecurity, potentially improving the defense against cyberattacks, as the it can secure, prevent fraudulent activities through consensus, and detect data tampering based on its underlying characteristics of immutability, transparency and data encryption.