Banner Default Image

Blogs

Bridge Bytes: Is Europe really ready for blockchain?

8 months ago by Nathan Baldwin

blockchain

On the 12th February Belgium announced that their first node of the European Blockchain Services Infrastructure (EBSI) went live.

The plan to create EBSI was first conceived in 2018 by a project led by the EU states and seemingly Europe’s answer to The Avengers, aptly named the European Blockchain Partnership. The EBP is made up of 30 signatory states including Britain (but let’s not go there right now) each of which plans to integrate blockchain nodes within their digital infrastructure.

According to the EBP the central aim of the EBSI is to enable cross-border public services, improve data integrity, create blockchain educational resources and opportunities such as diplomas and provide trusted data sharing for cross-border trade. But one question has been at the tip of many sceptics’ tongues, is blockchain safe?

 

First, let’s scratch those heads… what is blockchain?

Blockchain is essentially a series of blocks made up of three things: Data, Hash and a Previous Hash. These three things store records of movements of data, for example the Bitcoin blockchain will record whenever a transaction is carried out using Bitcoin. Whenever a transaction is made, and a new ‘block’ is completed, it is added to the ‘chain’, a set of historical records. Blockchains can be programmed to record different pieces of information, for example who made the transaction, the time the transaction was made and how much the transaction was worth.

Now, you’re probably thinking that we’ve just explained what a common bank statement is and that we’re idiots.

 

So, what makes blockchain so great?

Well, there are a few important features that differentiates blockchain to other data management methods:

1. Decentralisation - the first and perhaps most controversial is its decentralised management feature. Blockchain does not store all of its data in one central location, instead it copies and shares its data across a network of computers, these computers are added into the blockchain via nodes. So, whenever a new block is added every user in that network is updated. This not only means that everything traceable, it also makes it far more difficult for a potential hacker to penetrate the security network.

2. The chain – no we’re not talking about Fleetwood Mac’s 70’s classic, we’re talking about real chains! (well digital ones at least). The chain is a linear link structure in which the blocks relate to each other. When a block is completed it becomes another link in the chain, some chains can be made up of hundreds of thousands of blocks. Every time a new piece of data is added to the chain, it then changes the hash in the previous block. So, if a hacker were to change payment details in one block, they would then have to change the payment data contained in every previous block.

3. Timestamps – every block is timestamped, once a timestamp is added, it cannot be manipulated or overwritten. This means that the true origin of an action, for example a bank transaction, is always documented. Making it much easier to detect a threat and minimise risk.

 

There’s always a but…

Many critics have raised concerns over how blockchain will be regulated, especially in a cross-border coalition. But what threats could blockchain pose to Europe’s digital infrastructure?

GDPR: each European state abides by the General Data Protection Regulation, which essentially ensures organisations are handling people’s personal information responsibly and privately. But blockchain’s user generated security system could result in the personal information of thousands of users falling into the hands of other network users.

Regulation: with blockchain’s decentralised structure, it makes it very difficult for one regulatory body to ensure everything is in line with national standards. For example, in the UK the Financial Conduct Authority could regulate how blockchain processed payment information. However, as there is no one location where that data is stored, how would the FCA find the time and resources to ensure that every block was storing relevant and legal data in a responsible way?

The unknown: perhaps the most daunting threat is that blockchain is still in its infancy. It hasn’t been around long enough to determine that it is 100% safe, or that it’s even better than current alternatives.

Politics: finally, and perhaps the biggest threat to Europe’s future data management processes is in fact its own politics. With Brexit likely to destabilise the current EU infrastructure, how will the states of the EU ensure that a constant line of communication and collaborative regulation is sustained? A question that only time can answer.