Abstract
Distributed ledger technology (DLT), decentralized finance (DeFi), blockchain – these are terms that have been trending especially in technology circles. Today, blockchain has gained more acceptance, but sceptics continue to raise concerns about the technology's scalability, security, and long-term viability. There are also concerns regarding its being associated with crime and the dark web, which might imply it will have negative consequences if adopted. It has its own peculiar cyber security loopholes, but these can be addressed. That notwithstanding, organizations stand to gain from the blockchain in terms of cyber security; especially its qualities of decentralization and immutability. It has been successfully implemented in some sectors with positive results. This chapter seeks to illustrate how the blockchain can be used to boost and optimize cyber security for organizations.
TopBackground
Today's increasing reliance on technology and the internet has given rise to new business models and revenue streams for businesses, but it has also created new vulnerabilities and opportunities for cyber criminals to exploit. Due to the use of more sophisticated malware and the growing threat of professional criminal cyber organizations and also nation states using such malicious actors to carry out cyber-attacks against and siphon funds from other nation states; cyber-attacks have grown more targeted and complex (Cybersecurity and Infrastructure Security Agency, 2022)There has also been a surge in use of stolen identity and credentials for malicious activity, reducing reliance on malware, as was observed that 62% of detected malicious cyber activity in the first quarter of 2021 were free of malware (Business Australia, 2022). Cyber criminals now attempt to steal valuable data such as intellectual property (IP), personally identifiable information (PII), health records, and financial data, and are employing highly profitable strategies such as monetizing data access via advanced ransomware techniques or disrupting overall business operations via Distributed Denial of Service (DDoS) attacks.
So, what about blockchain technology? Will technology be an aid or a detriment to cyber security? As a matter of fact, blockchain is seen as an enabler for cybercrime, in that cryptocurrency has been the preferred payment method requested for by criminals for ransomware and even kidnapping based on its perceived anonymity. The CEO of Fireeye observed that increase in ransomware attacks was closely related to the coming of cryptocurrency as a result of anonymity of entry and payment (Singh, 2021). There are also cases of money laundering with cryptocurrency, according to the BBC, money laundering by way of cryptocurrency increased in volume by 30% as at 2021 (BBC News, 2022). Criminals in addition to the usual money laundering tactics (layering, placement integration, money mules and so on) also use mixing services (also known as tumblers) which mix the crypto with others in a pool before sending back, obfuscating source and destination of funds (Stevens, 2022). There is also the technique of chain-hopping whereby funds are siphoned using cheaply acquired or stolen accounts to make tracing difficult (Stevens, 2022).
Key Terms in this Chapter
Pseudonymity: One of the qualities of the blockchain is anonymity, but that is not really the case. A transaction, for example, could be carried out by an individual without exposing the individual’s personal identity, but the profile used would be known and recorded; hence activities can be linked to a specific profile without actually disclosing the actual owner of the profile. That is why the blockchain is said to be pseudonymous, that is pseudo-anonymous.
Central Bank Digital Currency (CBDC): CBDC’s are digital currencies issued by central banks of countries. They are managed and issued by the central bank just like normal fiat currency.
Blockchain Bridge: Blockchain badges are protocols used to facilitate interoperability between different blockchain networks. Some examples include Polkadot, Cosmos and Blocknet. They enable communication across different blockchains; for example, transaction between Bitcoin and Ethereum.
Cryptocurrency: Cryptocurrencies are digital currency that recorded and verification carried on the transactions using decentralized and distributed networks. The first cryptocurrency was Bitcoin. one of the major reasons for developing cryptocurrency was to address the issue of double spending in digital currency.
Know Your Customer (KYC): KYC is a way by which service rendering organizations try to ensure their customers are actually who they claim to be by verifying the biodata they provide when being registered on the database of the organization. This can be achieved by verifying means of identification, utility bills and physical address verification.
Decentralized Finance (DeFi): DeFi refers to financial models that operate without a central authority. Cryptocurrencies are examples of DeFi. The decentralization is meant to enhance security and add checks and balances without a single point of failure.
Distributed Ledger Technology (DLT): DLT are technological systems that record transactional data over multiple distributed networked nodes at the same time. This allows for simultaneous recording, validation and updating of transactions. Examples are blockchain and directed acrylic graph (DAG). The technology is applied in DeFi.
Blockchain: Blockchain is a distributed ledger technology that is decentralized and immutable. It is immutable because of its decentralized and distributed nature, data is stored across various nodes and a record is confirmed and stored after there is a consensus among the nodes (at least 51%). It is made of blocks linked by hash functions, each block contains the hash of the previous block which creates a situation where it would be difficult to make modifications to any block, as a change in a block will result in a change in the hash of previous block.
CIA Triad: CIA in cyber security terms refers to confidentiality, integrity and availability, and these represent the objectives of cyber security as regards data and information. Cyber security is meant to ensure data are confidential (kept away from those not authorized to access); integrity by ensuring data is not tampered with or contaminated; and the data is available to authorized users when they need to access it.
Border Gateway Protocol (BGP): BGP is the protocol for routing systems managing how packets get routed in the network; usually by directing the packets from communicating nodes to another the one with the shortest route.
Immutability: Immutability is a quality of the blockchain and distributed ledger technologies that arise as a result of their decentralization and distribution, which ensure they do not have a single point of failure and are always up and running and available.