Blockchaining the world

For social scientists and not-so-financially-savvy laypersons, the concept of blockchain might prove a bit difficult to understand at first. Blockchain is ‘a public record of information, stored and maintained through a decentralized system of peers, and secured by sophisticated cryptographic algorithms’ (Magnuson, 2020: 60). It is a record of transactions that cannot be altered or deleted (Tvede, 2020). As mentioned in the introduction, blockchain and DLT were first used in developing the cryptocurrency bitcoin in 2008. Today, this technology has been used in a range of commercial and non-commercial applications.

What makes blockchain unique is that it is a database—a record of documents, images or transactions—that are simultaneously held in several locations. The database, thus, is not located in one, centralised processor but in peer-to-peer (P2P) distributed networks. Data held in ledgers is small and encrypted; it is erroneous to think about blockchain as an extensive, immediately legible database (Baucherel, 2020). Every node (a member of the network) has a copy of the ledger and two keys: a public key available to everyone in the network used to confirm the identity of the sender, and a private key which is used to create a digital signature for transactions. The ledger has a growing list of records that users put in, called blocks. Each block has several key components: the block identifier, data, a timestamp of the individual entry, a cryptographic hash that prevents modification of verified data, and a link to the next block. When the new block containing information or transaction arrives, it is validated and authorised by block miners (or forgers, depending on which system of validation blockchain adopts) and added to the block. Most or all the members of the network must agree that the transaction on the block is accurately recorded (this is called consensus mechanism), after which point, the block is immutable. Miners receive remuneration for this service that is essential for the survival of the chain, often in forms of a local currency or cryptocurrency. The winning miner is the one who solves a complex mathematical problem first, usually with a powerful computer with high processing power; this is a very energy-intensive process. When more than 50% or all the nodes agree that the miner solved the problem correctly and verify the new block is accurate, the chain is updated. If participants disagree on the block, the block is left out of the chain (and is colloquially called a ‘fork’). Forks are sometimes introduced by developers who use this technique to incite a change in the chain, for example, to introduce new rules for validating the transaction, or the new value of the cryptocurrency.

Blockchain technology, thus, has the following common features:

  • • It is open, verifiable, and permanent by nature;
  • • A decentralised consensus must be achieved to create a new block;
  • • Transactions are immutable; once a transaction is validated a new block is created and the previous one cannot be altered without the agreement of the majority of participants in the chain;
  • • It is managed in a decentralised network;
  • • It establishes digital trust; and
  • • It is secure by design (Chowdhury, 2019).

There are different types of blockchain systems, such as permissionless and permissioned blockchains. Permissionless or public blockchains are the ones everyone with a computer and the Internet access can join (i.e. one does not need permission to participate). The most well-known example of permissionless blockchain is bitcoin. As will be discussed later, this of course does not mean that a person will be successful in earning bitcoin just by having a computer and Internet access. Permissioned chains, on the other hand, are private and new actors are approved by existing participants or nodes (van Rijmenam and Ryan, 2019).

The final concept to flag at this point is so-called ‘smart contracts’. As with many inventions in the realm of digital frontier technologies, the name is somewhat confusing as smart contracts are neither smart nor contracts. They are computer protocols that facilitate and verify transactions without the third party. They operate within ‘if this x, then y’ module: the computer runs the program—x happens (the settlement date on your mortgage agreement) and y is automatically validated and executed (the asset goes to a buyer). Smart contracts and their importance will be explored later in the chapter.

A feature of blockchain that is critical for its applications in other industries and relevant for criminologists is blockchain’s potential to ‘establish the most sophisticated tracking and transparency systems that we have seen to date’ (van Rijmenam and Ryan, 2019: Section 1.4: Seven Wicked Problems). This feature is particularly important in areas of social engagement where counting and tracking people, goods, or services is of essence. For example, during primary elections in two counties in West Virginia in 2018 the authorities allowed electorates to register their votes in a public blockchain. Voters were required to post a photo ID and a video of their face on an app; once their identity was verified, the app enabled their access to a public blockchain where they cast their vote and embedded it to the public blockchain. While the test went well, people were somewhat reluctant to adopt the technology. Regardless of this initial hesitation, and despite experts’ concern around its usability and privacy, blockchain’s use in general elections across the world is on the map (Magnuson, 2020). During the recent COVID-19 crisis, scientists in the UK suggested that blockchain could mitigate risks vis-à-vis contamination in supply chains in the post-pandemic world. They implied the technology could enable a ‘Coronavirus Clearance Certificate’ that could be issued to organisations, products, and maybe even people to confirm that they followed instructions and appropriate steps to minimise the risk associated with the virus. As Olinga Taeed, a visiting professor at Birmingham City University argued, ‘|t|he certificate confirms that a supplier adheres to highest standards of public health, sustainability, anti-bribery and even modern slavery’ (cited in Hulliet, 2020). Many excellent resources explain the nature and development of blockchain and DLT if you wish to further your knowledge on this fascinating technology (Draper and Romans, 2018; Chowdhury, 2019; Baucherel, 2020; Magnuson, 2020).

Four broad groups of concerns shadow the use of blockchain. The first group contends that blockchain will not empower everyone; quite the opposite, the technology might amplify some social injustices based on gender, race, economic status, and education. The second suggests that blockchain will benefit the rich and those with resources. The third points out that, like every technology, blockchain could, and is likely to, be abused. Finally, critics worry that blockchain might simply replace one form of governance with another (for more details see Reijers and Coeckelbergh, 2018). Without going into details on this but having in mind some limitations of technology, I now turn to the overview of current and potential future relevance of blockchain to offending and crime control.

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