Contemporary enterprises often utilize many partners to deliver services or products to other enterprises (business to business [B2B]) or the public (business to customer [B2C]). To ensure that quality services and products are being delivered and to identify any partners who may be behaving unethically, enterprises need trust assurance. Trust assurance software and tools exist to automate the processes that provide assurance so there is an adequate amount of trust in place to continue with a particular business transaction.1, 2 They are tools for attracting new customers, retaining existing customers, generating new business leads and improving brand image. The more trust that can be provided for a product or service, the more improved the brand image and reputation, which is crucial in the crowded global marketplace.
The overwhelming amount of digitally driven business transactions performed in day-to-day life creates opportunities for a variety of threats to arise related to confidentiality, integrity, availability, accountability and privacy. As digital transformation efforts rapidly expand worldwide, it is possible that enterprises will suffer more financial and reputational losses due to the lack of a structured digital trust assurance strategy. Having a well-designed, collaboration-based and trust-driven assurance strategy based on trust assurance tools supporting digital transactions helps protect against these threats.
Digitization of Trust Assurance
There are various factors that should drive decisions about digital trust assurance in an organization, including:
- Regulatory requirements—Based on the nature of the business (i.e., what products/services are offered), global organizations must comply with a variety of compliance mandates enforced by global regulators. For example, a B2C organization may need to be aware of the UK Consumer Rights Act 2015 (CRA). The CRA sets standards for supplying services to consumers with reasonable care and skill and can affect both pricing and timing of services.3
- Geopolitical risk—Geopolitical risk is presented by wars, terrorism activities and tensions between states and may negatively impact the relationships between various countries and their global business relationships. For example, the war between Russia and Ukraine has triggered significant geopolitical risk.4 The price of petrol has significantly increased, which has impacted various business sectors as a cascading effect.5
- Arrival of new technologies—The increase of new technologies in the digitally transformed world creates new opportunities for business growth, but it also introduces new risk.6
- Social issues—Social issues trigger various types of social risk, including biological risk (e.g., epidemics, pandemics), economic risk (e.g., drastic changes in macroeconomic factors such as inflation, financial crisis, labor-market instability) and demographic risk (e.g., aging population, changes in mortality rates).
- Environmental changes—Climate changes impact organizations around the world. Extreme weather events such as severe storms and floods can cause disruptions in the growth and supply of food systems, spread waterborne diseases and lead to other health hazards.
- Economic issues—Fluctuations in the global economy can trigger:
- Fiscal crisis
- Sovereign risk
- Fluctuations in foreign exchange rates
- Credit risk
- Liquidity risk
- Operational risk
The ledger system of blockchain technology is expected to establish a robust trust mechanism in the future that will eliminate the need for middlemen and data silos across various platforms.
Blockchain-Driven Digital Trust Assurance Mechanisms
Blockchain has a built-in trust assurance mechanism that is used by enterprises to build digital trust assurance platforms. Trust is the key aspect of blockchain technology. With blockchain technology, organizations no longer need to rely on a central authority to provide assurance of digital business transactions. Blockchain technology-driven systems have a ledger system that holds a record of all digital business transactions and is updated and synchronized as new transactions occur. When two parties trade products and services, all transactions are executed and settled on the ledger itself so that the involved parties can trust the system and complete the transaction. The ledger system of blockchain technology is expected to establish a robust trust mechanism in the future that will eliminate the need for middlemen and data silos across various platforms. Since this ledger is public, meaning everyone has access and all transactions are traceable, it helps organizations build a robust trust assurance strategy.
How the Distributed Ledger System of Blockchain Provides Trust
The distributed ledger technology (DLT) of blockchain ensures that all transactions conducted using the system are duplicated and distributed across the entire network of systems integrated into the blockchain. These decentralized chains are immutable, which gives assurance of the completion of business transactions.
Data entered into the various blocks of the blockchain are spread out among several network nodes present across the system. This helps ensure the security and availability of the data elements entered into the chain from business transactions. If anyone tries to alter any of the data elements available in a particular network node, the data elements present in other nodes will remain unaltered. If adversaries try to tamper with the logs of transactions in a particular network node, all other network nodes will verify this activity with each other, which helps trace the network node where the tampering of information occurred. This way, none of the individual network nodes within the blockchain can alter the information of business transactions held in blocks of the chain, which makes these network nodes trusted.
Blockchain-based trust assurance systems provide confidence in the transactions happening in those systems, thus reducing risk. Additional technology elements such as cryptography (i.e., combining the message transfer capabilities of hash functions with robust security controls) and hashing functions (generally used for checking and confirming the integrity of messages transferred and authenticating information) make blockchain-based trust assurance systems reliable because they create deterministic functioning and consequent predictability. Globally, efforts are being made to leverage blockchain to provide an unalterable, distributed ledger for transactions, supply chains and other enterprise processes.7 The DLT component of blockchain has proven useful in ensuring the integrity and authenticity of critical business transactions happening in financial markets, including the insurance and mortgage industries, in which a significant amount of legal and related reconciliation work takes place.8 The DLT component driving the blockchain systems can be classified as private or public permissioned, or permissionless. There are DLT platforms on the market that help businesses build their own blockchain-driven systems, including Ethereum, Hyperledger, Quorum, Corda, Iota, Cardano, EOSIO and VMware.9
The use cases of blockchain-based systems are evolving.10 Elimination of the hierarchy of participants, the need to protect personal data, and the capability to automate various business processes have led to more enterprises implementing blockchain-driven systems.11 Based on the trust assurance capability of blockchain technology, innovative cloud computing services such as Trust as a Service (TaaS) are being provided by new enterprises in the market.12 TaaS provides electronic identification and trust assurance services to organizations for business transactions such as trading, lending and intellectual property rights management.
Blockchain technology also helps bring significant transparency into business value chains. Members operating and managing value chains can see with greater transparency how each process executed in the value chain is converted and linked into the chain in real time. This capability of blockchain technology will help governments plan the development of communities of trust across various industries.13
Security and Privacy Concerns About the Use of Blockchain Technology
There are a number of security and privacy concerns that need to be addressed before organizations will feel comfortable putting their critical data into a blockchain system. As the data in a blockchain can be viewed by other members in that blockchain, data privacy is a concern. Security and privacy issues presented by blockchain-driven systems include:14
- A blockchain can be hacked similarly to other platforms. For example, in the August 2016 Bitfinex attack, US$65 million was lost. Bitfinex was driven by blockchain technology, which was used to trade cryptocurrency in bitcoin.15 In June 2016, The Decentralised Autonomous Network (The DAO), the largest Ethereum project (cryptocurrency-driven) was hacked and US$150 million was lost.16
- A blockchain can be infected by malware. For example, a proof-of-concept (POC) study in 2015 demonstrated that blockchain software could be morphed into malware that could circumvent the blockchain used by bitcoin and introduce data unrelated to transactions into the blockchain.17
- Banks have concerns about transaction confidentiality, securing private keys and the strength of cryptographic algorithms used in blockchain-based system-driven transactions.
- Any blockchain transaction is dependent on trust between two or more counterparties. Most people who use bitcoin for financial exchanges trust the exchange houses to address the security and privacy concerns of the blockchain technology platform. Many money exchange firms are not fully regulated entities. They cannot offer assurance for the transfer of digital currencies.
Efforts are continuously being made to address the security and privacy concerns related to blockchain technology. There is no single solution currently in place to address these concerns; however, users of blockchain-driven trust assurance systems should regularly scan for emerging threats targeting the security and privacy aspects of these systems.
Organizations should start building trust into the DNA of their IT ecosystems and digital operations using blockchain technology and its centralized ledger system.
Conclusion
A lack of robust trust assurance mechanisms creates inherent bias and potential for fraud to exploit a digitally driven IT ecosystem. Organizations should start building trust into the DNA of their IT ecosystems and digital operations using blockchain technology and its centralized ledger system. With such trust and resilience built into digitized systems, organizations’ digital transformation efforts will succeed by helping to mitigate the risk of digital transactions creating security and privacy threats. The success of digital trust assurance depends on the ability of an enterprise to protect its systems, data and entire IT ecosystem. The increasing use of blockchain-based systems is a classic indicator of the optimal level of trust assurance provided by the blockchain. Though blockchain-driven systems present security and privacy concerns, with the arrival of more stable and secure blockchain platforms these concerns are expected to be addressed, and more organizations will likely start using blockchain-driven systems.
Endnotes
1 Armanino, “TrustExplorer,” https://www.armaninollp.com/software/trustexplorer
2 DNV, “MyStory—A Blockchain-Powered Digital Assurance Solution,” https://www.dnv.com/services/my-story-a-blockchain-powered-digital-assurance-solution-141277
3 Parliament of the United Kingdom, Consumer Rights Act 2015, United Kingdom, 2015, https://www.legislation.gov.uk/ukpga/2015/15/contents/enacted
4 Kleintop, J.; “Geopolitical Risk Update: Russia-Ukraine,” Charles Schwab, 22 February 2022, https://www.schwab.com/learn/story/geopolitical-risk-update-russia-ukraine
5 Kolaczkowski, M.; “How Does the War in Ukraine Affect Oil Prices?” World Economic Forum, 4 March 2022, https://www.weforum.org/agenda/2022/03/how-does-the-war-in-ukraine-affect-oil-prices/
6 Resolver, “Nine Biggest Risks to Disruptive Innovation and Technology in 2020,” 22 January 2020, https://www.resolver.com/blog/risks-disruptive-innovation-technology/
7 Larsen, K.; D. Krone; A. J. Ford; “Leveraging the Blockchain to Provide an Unalterable, Distributed Ledger for Transactions, Supply Chains and Other Corporate Processes,” ReedSmith Technology Law Dispatch, 23 November 2016, https://www.technologylawdispatch.com/2016/11/regulatory/leveraging-the-blockchain-to-provide-an-unalterable-distributed-ledger-for-transactions-supply-chains-and-other-corporate-processes/
8 Oodles Blockchain, “Blockchain Solutions for Reconciliation and Dispute Resolution,” 2 February 2021, https://blockchain.oodles.io/blog/blockchain-invoice-reconciliation-dispute-resolution-solutions/
9 Lawton, G.; “Top Nine Blockchain Platforms to Consider in 2022,” TechTarget, 24 March 2022, https://www.techtarget.com/searchcio/feature/Top-9-blockchain-platforms-to-consider
10 Forbes Technology Council, “Thirteen Evolving and Emerging Uses for Blockchain Technology,” Forbes, 10 June 2020, https://www.forbes.com/sites/forbestechcouncil/2020/06/10/13-evolving-and-emerging-uses-for-blockchain-technology/?sh=21516758162e
11 Karpenko, L.; A. Akhlamov; S. Onyshko; I. Chunytska; D. Starodub; “Blockchain as an Innovative Technology in the Strategic Management of Companies,” Academy of Strategic Management Journal, vol. 18, iss. 1, 2019, https://www.abacademies.org/articles/blockchain-as-an-innovative-technology-in-thestrategic-management-of-companies-8585.html
12 Spiceworks, “Blockchain: Trust as a Service,” 28 June 2018, https://www.spiceworks.com/finance/fintech/articles/blockchain-trust-as-a-service/
13 Burger, S.; “How Blockchain Is Being Used to Build Trust Across Value Chains,” Creamer Media’s Engineering News, 2 September 2022, https://www.engineeringnews.co.za/article/how-blockchain-is-being-used-to-build-trust-across-value-chains-2022-09-02
14 Mani, V.; “A View of Blockchain Technology From the Information Security Radar,” ISACA® Journal, 25 August 2017, https://www.isaca.org/archives
15 Jones, J.; “Largest Cryptocurrency Hacks in History: How They Happened,” Coin Central, 11 April 2022, https://coincentral.com/largest-cryptocurrency-hacks-in-history-how-they-happened/
16 Ibid.
17 Kapersky, “Security Researchers Identify Malware Threat to Virtual Currencies,” 26 March 2015, https://www.kaspersky.co.in/about/press-releases/2015_security-researchersidentify-malware-threat-to-virtual-currencies
VIMAL MANI | CISA, CISM, SIX SIGMA BLACK BELT
Is head of the Information Security Department of the Bank of Sharjah. He is responsible for the bank’s end-to-end cybersecurity program, coordinating its cybersecurity efforts across the Middle East; implementing its cybersecurity strategy and standards; leading periodic security risk assessments, incident investigations and resolution efforts; and coordinating the bank’s security awareness and training programs. He is an active member of the ISACA® Dubai (United Arab Emirates) Chapter. He can be reached at vimal.consultant@gmail.com.