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So, what's this blockchain thingy? - a World Money Laundering Report exclusive (part 4)

How up to date is a blockchain? How secure is a blockchain? A blockchain does not make new things happen.

How up to date is a blockchain?

No one knows, but it's very fast. While it's not a block chain application, try sitting next to someone accessing the same WiFi connection and sending them a WhatsApp. In most cases, wherever you are in the world, the message will arrive almost before you can say "I've sent you a message." In theory, that's how quickly transactions are relayed around the block-chain. Of course, network congestion can cause delay, as can broken primary undersea cables and, of course, internet filtering imposed by some governments.

How secure is blockchain?

It's no less secure than keeping your cash in a physical safe in a bank and, just like if the bank manager decides to raid the safe and run off with the money, there is the risk that an insider might just steal your tokens. There have been a number of instances where providers of "wallet" services have done exactly that - or where their servers have been hacked and records stolen which has then enabled tokens to be transferred.

However, there are emerging threats and they are as yet both unknown and, probably, unknowable. The basic problem is that we can essentially consider blockchain technology as creating the ability to generate alternate universes and no, that is not as outrė as it sounds.

There are no restrictions on the nature of data that can be saved to a blockchain. It doesn't matter whether it's numerical or alphabetical or, even, in non Romanised characters. If a computer can be programmed to understand it, then it can be saved and if it can be saved it can be accessed and manipulated. In short, the data that can be subject to blockchain applications is limited only by the imagination of those using it.

One application, popularised by the platform Ethereum, is "smart contracts." This has already become such a buzzword that it's been used in at least one fraud.

But of more interest is that, when a fraud was committed by someone fraudulently abusing a smart contract, Ethereum, it is reported, took a very technical action and effectively abolished the transaction.

This isn't easy to understand but stick with it because it's important. It is reported that Etherium, being made aware of the fraud, made what is called a "hard fork" of the history in the ledger and this meant that they were able to delete all records of the fraud. The imperative was clear: the fraudster had "tricked" a so-called smart contract into executing repeatedly and that transferred some "ether" (the name of Ethereum's currency) to the value of about USD80 million. Like all currencies, the interchange value of ether is defined only by the confidence people have in it. Ether's value immediately fell by about a quarter.

This has caused considerable debate. Some say that by intervening, Ethereum has undermined the independence of the blockchain and that things should be left to their own devices. Others say that, where there is demonstrable error or fraud, intervention is the appropriate course of action.

But... if Ethereum did as reported, it is groundbreaking news for law enforcement. See below.

The blockchain does not make new things happen.

What the blockchain is not is a form of artificial intelligence. Nor is it machine learning or any of the other current buzzwords. It is not fintech, nor regtech, nor is it a technology for identifying potential money laundering. Let's be very clear: of itself, it does nothing except store data and make it accessible for processing.

The blockchain only does what it is told to do. And for that it is necessary to have applications, although many in the tech industry are trying to find new names to try to make it sound as if there is something new when, in truth, the only new thing is the clever bit of the blockchain and their applications are just doing more or less what they have done before but underpinned by something that is, for now, novel.

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part 1:
https://www.pleasebeinformed.c...

Part 2:
https://www.pleasebeinformed.c...

Part 3:
https://www.pleasebeinformed.c...

Part 4:
https://www.pleasebeinformed.c...

Part 5:
https://www.pleasebeinformed.c...

Part 6:
https://www.pleasebeinformed.c...

part 7:
https://www.pleasebeinformed.c...

Part 8:
https://www.pleasebeinformed.c...

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