The recent boom in crypto assets, such as Bitcoin and Ethereum, has introduced the masses to blockchain technology.
Blockchain has a number of benefits: it is implicitly secure, adaptable, cost-effective and universally accessible. People are starting to wake up to the practical uses of blockchain and its potential to revolutionize industries and solve age-old problems – one of which is cybercrime.
Traditionally, organisations store information on centralized systems and challenge people to prove they know the information stored, before acting on their instructions. However, recent high profile cases of cybercrime have emphasized that our personal information is no longer secure. The Equifax data breach, in which the personal information of 143 million Americans and 400,000 Britons may have been stolen in the summer of 2017, is just one example.
Closer to home, the ONS recorded six million cases of fraud and cybercrime in England and Wales in 2015/16, which cost the UK £11 billion. However, with few alternatives, consumers have no choice but to place their trust in organisations when it comes to managing and handling their personal details securely.
That is until now. The application of blockchain technology could provide the solution to the cybercrime epidemic.
For example, at Zonafide, we have developed a digital wallet to help users secure Activities and take back control of their personal information – we call it being self-sovereign. An Activity is something important you're doing, such as a house purchase payment, and takes the form of an Ethereum-based smart contract. By using a digital wallet, users can securely share their Activities to provide they're legitimate.
In addition, as the blockchain network is decentralised, it avoids the inflexibility, inefficiencies, costs and weaknesses embedded in centralised systems.
Think of it like a one thousand piece puzzle. By hacking a centralised system, a criminal can access all one thousand pieces, i.e. personal details about one thousand individuals. With a decentralised system, criminals can only access one piece at a time, making it much more time consuming and near impossible to understand the whole picture.
In addition to Zonafide, there are a number of other similar, although not identical propositions, on the market that use blockchain and digital wallets to reduce cybercrime. By using this technology, we change the relationship of trust – it allows people to control the means to identify themselves to organization.
Another significant advantage of using blockchain technology, and an Ethereum-based smart contact, is that it does not need to store information, but can still attest to its existence.
Currently, however, there are a number of common misconceptions about blockchain that limits its wider adoption.
Firstly and counterintuitively, there is a perception that crypto assets are associated with criminal activity. Whereas in reality, the use of conventional assets for criminal activity completely dwarfs that of crypto assets. Furthermore, blockchain-based transactions are completely public, so the potential to automate controls to minimize the use of crypto assets for criminal activity is enormous.
Many also question the scalability of blockchain, but at its core, this is simply a technical issue. At first, blockchain will be restricted to where its use is proportional to the need. But as the technology evolves, its use will be expanded across multiple applications.
In the case of cybercrime, blockchain will initially be limited to fighting cyber theft in one or two sectors. For example, at Zonafide, the first use case of our proposition is in the life events sector for Local Government Register Services.
However, the scope of application is potentially limitless. The use of blockchain to fight cybercrime could be expanded across financial services, law, conveyancing, or any other industry that requires someone to verify that what they're doing is legitimate.
As a veteran of financial technology, I can see that blockchain's advantages are compelling and transformative. Ultimately, once the technology scales, its impact will be far reaching and the scourge of cybercrime will finally be brought to heel.