ETHICAL IMPERATIVES OF BLOCKCHAIN TECHNOLOGY

This article is written by Kamal Singh Rautela of 3^rd Year of Lloyd Law College, CCSU, an intern under Legal Vidhiya

ABSTRACT

The concurrent times are emphasizing in the rapid technological enhancements for better efficacy and security concerns of data usage and transactions. Blockchain technology is still a model need more comprehension before completely adopting and merging it to the present digital technological applications in all the sectors.  We do know the blockchain as a digital distributing network ledger based on a decentralized operating model which prevents any other intermediaries to maliciously alter the information by recording the data in immutable forms through the network nodes. The 2021 news article published in the New York times claimed around $140 Bn. to be appeared lost or otherwise according to the cryptocurrency data firm chainalysis[1]. This instance is an implication of the accountability concerns of using the blockchain technology without any certain code or guidelines to intactly carry out the data storing and transferring as the source revealed many incidents of people lost or forgotten the private keys to their bitcoin fortunes. This article specifically aims to briefly acknowledge the ethical issues and impacts of this enormous technology with main emphasis on suggesting ethical imperatives generalized for using the blockchain network and other related applications which work on this model like the cryptocurrencies or AI models or Ethereum, etc.

KEYWORDS:

 Blockchain Technology, cryptographic codes, network nodes, immutable data storing, decentralized data, digital social contract, Proof of Work (PoW) and Proof of Stake (PoS).

INTRODUCTION

With the continuous adopting of the blockchain technology, it is crucial to consider the probable harms of using of it without exploring the respective social and ethical implications which could be diverse and wide-ranging. Whereas blockchain can be an instrument of democracy, it can also be used by governments or other entities to exert and consolidate power over people and information; Whereas crypto-economic systems can increase financial inclusion and create innovative microeconomies, these structures could also create exploitative systems with perverse incentives or undermine existing payment and monetary systems that have the virtue of being understood and accepted within formal financial markets[2]. The field of ethics provides tools for determining the decision-making is right or wrong.[3] It’s not difficult to understand that how the benefit of transparency and security of blockchain could be subsided by analyzing the privacy and accountability concerns arises out of it. The 2018 news of donation to al-Qaeda linked organization of $685 sent by anonymous individual in digital currency[4] is just one of the many repercussions occur as an aftermath of blockchain technology and should be taken as warning signs. We’ll discuss further in this article to introduce some general and universal ethical codes or guidelines to be applied during the use of this technology which could obstruct and bind the individuals or groups using the same with some responsibility and augment their vigilance while handling such exclusive applications. There are various organizations which have suggested ethical imperatives for this purpose diversely on various applications based on this technology whether organizations, AI, or others. We will discuss some basic and general such imperatives in this article.

OBJECTIVE

This article aims to recognize the general concerns arising while using the blockchain networks and trying to suggest some ethical imperatives which could increase the safety and diminish the social and ethical concerns that cannot be resolved by the blockchain itself. We will surely be discussing how these concerns arise at first place and why there is a need to have a universal ethical code of various flexible imperatives. This article gives a crux of various research studies, news, journals, etc. concerned with this topic.

ETHICAL ISSUES OF BLOCKCHAIN TECHNOLOGY

1. Data Privacy: When it comes to private sensitive data, it becomes important to be vigilante over who can access the same. The online identifier which acts as an ID akin to details you fill in a bank account or email address or a social media account, records such data credentials in a block chain network on all the notes containing the block chain with which you want to interact, some of which can be more easily compromised than a secure central network. [5] This simply means that a person’s login credentials with sensitive private data could be saved in a cyber space forever because of the imitable nature of the block chain networks.

The de-centralized characteristic of this technology concerns the legality of ownership of the data which is shared in the network node as it would be difficult to track who can access such data and who all have recorded such data. In the absence of a central authority, it is not possible to alter a data once recorded.

When we talk about organizations, when this technology is used for the purposes of recruitment of staff, it will surely benefit the employers as it would create a system of transparency in the information of the people, they would hire but it would violate the right to be forgotten of people who have now upskilled or moved away from their past personalities. This technology would hamper their opportunities to grow.

• Data Security: According to various authors and data studies, a number of security concerns in using block chain technology which includes 51% vulnerability, double spending, mining pool attacks, criminal activities, private key security, transaction privacy leakage etc.

51% vulnerability refers to the situation when the miners working on the distributed consensus mechanism joined together and gets control of 51% or more computing power which has been disturbed among them under the system then they take control of the whole block chain network which causes serious security risks including alteration of transactions, termination of verification process etc.

Double spending refers to the use of same crypto currency for multiple transactions; Mining pool attacks refer to the infiltration in the resource pooled by miners that is created through a sharing mechanism over a common network. Similarly, there are many sets of such methods through which the data could be accessed by hackers and misused.

• Illicit/Criminal Activities: In 2022, researchers tracked a total of 134 hacking cases, a major increase from the 104 incidents recorded in 2021. Analysts had been tracking the growing wave of hacking attempts on digital currencies as the year progressed. In fact, Chainalysis proclaimed October 2022 as “the biggest month in the biggest year ever for hacking activity,” with the total cryptocurrency stolen reaching $718 million. By October, hackers had already amassed a total of $3 billion from 125 successful hacks.[6] The chainalysis reports further published in the economic times over the $624 Mn. attack on Ronin Bridge, estimations published on Reuters about the North Korean-linked hackers stole virtual assets worth $630 million in 2022, while a cybersecurity firm assessed that North Korean cybercrime yielded cybercurrencies worth more than $1 billion[7] and the cryptocurrency heist by estimation by North Korean hackers of estimation $100 Mn[8] and the claimed $8.6 Bn. of cryptocurrency laundering in 2021[9] are some instances of misuse of blockchain and economic threat it poses on its users. Its fortunate that still the sector has not yet emerged to a greater extent otherwise could have done even severe such losses which would be quite fatal.

The anonymity provided by these systems facilitate many such criminal activities of money laundering, tax evasion, illicit goods and services supply chain, funding terrorist organizations, etc.

• Smart Contract Security: These contracts are simply pre-coded actions which work on contingency basis that means when certain specific pre-coded conditions are met then only it is performed on an automation basis. Its backdrop can be understood in situations when some loophole left in such contracts then it would be unjust enrichment for who finds the auditing mistake and worst part would be it would not be reversed. Further, it causes a concern of non-negotiability in such organizations in salary and compensation terms as they would have these immutable contract systems.

There are many such ethical issues including the copyright or IPR related issues to sensitive public accessible data, governance and decision-making which would require difficult consensus building requisite, inequality to access the system due to lack of required skills, environmental impact as the BBC also published in 2019 that Bitcoin uses as much energy as the whole of Switzerland, a new online tool from the University of Cambridge shows.[10]

ETHICAL IMPERATIVES

Now we would move towards the important ethics which are needed to be applied and followed while using blockchain technology:

1. Transparency: This feature of the blockchain can be leveraged for Promoting openness and accountability in various systems and organizations. An ethical blockchain always influence its users to comply with proper verification and auditing of the data transactions on the network so that in cases like hiring the staff it would be beneficial for the employers of the organization to confirm and check upon the authenticity of the qualifications presented by the candidates. In this way a system of trust and accountability can be built by using blockchain technology along with an effort to reduce any type of frauds or malicious activities.

The blockchain mechanism would also enable to verify the works and tasks submitted by the employees and would be efficient in regulating the management of these tasks being submitted in the manner required at the deadline fixed and with correct data. Further it can help not only analyzing such data but also in augmenting the Quality of the supply chain management back proper tracking of the goods and materials which conclusively reduces the risk factors of counterfeiting in such industries of logistics and manufacturing. In simple terms, it would ensure the data like the quantity of the products purchased, the information who sold the product, prices and all the important data which would be stored forever without any possible alteration.

However, it is required to still keep check on the data entries and there should be proper administration of the same because it is still possible to feed the incorrect data which would cause an unchangeable maliciously incorrect information.

So, it is very important to keep in mind that transparency is ensured in this consensus mechanism only with proper verification of the data stored or entered in this digital distributing ledger. Further, it should always be properly analyzed that which data should be entered into a public blockchain to be accessible by all and which data is to be used in private block chains to secure sensible data unwanted to be shared.

•  Privacy and Data Protection: The ethical blockchain technology ensures the protection of sensitive private data of people. To begin with, it decentralizes the control of distributing data storage which means unlike the traditional centralized system where one central authority has the whole control, this technology allows a network of the users to have a copy of the same data ledger. It simply eliminates the unnecessary intermediary system which is time consuming as well as less secure due to probable alteration in the data which is stored. As all the participants of the same network chain have access to verify the data it is difficult to tamper with the same.

Moreover, the data stored is already immutable which means that once data is entered it cannot further be modified or deleted which is very beneficial especially in healthcare sector where patient’s medical records are crucial and each time new records are added then the encrypted data add new blocks in the blockchain.

Furthermore, smart contracts allowed by this technology if used in ethical and vigilant manner then is very efficient in the industrial sectors as all the policy conditions would be predetermined along with absence of intermediaries thus efficient in timings and cost effective.

Last but not the least, the blockchain technology allows for private blockchain networks which includes limited authorized parties only. In this, the user could predetermine and create private blockchain where he allows only interested people to access his sensitive or private data. Many other methods, could also be used for the purpose like guidelines made to the type of data which would be publicly accessible or restriction over third-parties to use such available data, rigorous security audits of data, absence of any privileged or favorable class and implementation of unfair and equal system for all and others.

• Accessibility: For an ethical blockchain solution it should be significant factor to focus upon the incentives to promote incentives to acquaintance the people with the required cryptographic and coding skills. Providing people with necessary knowledge and skills further help in generating more employing opportunities through decentralized finance or other applications which would be economically beneficial ultimately. For the people would be motivated to demand and expect accountability from the system when they know the system themselves. It would also promote innovative thinking and give boost to startup spirit and saves lot of people from unjust exploitation also.
• Sustainability: As discussed earlier in this article there are some environmental concerns arising by using this technology. The ethical steps could be taken wisely includes transition to proof of stake (PoS) from proof of work (PoW) consensus mechanism which is quite efficient as it does not rely on the intensive energy mining methods of solving complex mathematical puzzles rather based on creation of new blocks based on number of tokens a user holds and willing to stake as collateral. Bitcoin mining is estimated to consume around 129.85 TWh of electricity annually[11] in PoW mechanism. After the Ethereum merge in 2022, Ethereum (world’s 2^nd largest cryptocurrency) also shifted to the PoS mechanism[12]

The use of permissioned blockchain networks such as Hyperledger, Ripple, R3 Corda, etc. causes less energy consumptions because of less computation as result of limited authorized accessibility than permissionless blockchain networks like bitcoin where computation is quite extensive and causing more energy consumption[13].

This PoS mechanism is more beneficial in reducing the 51% attacks as controlling majority stake is more expensive and difficult as per the world economic forum[14].

Ethereum further adopting measures like sharding, decentralized staking and more rombust smart contract auditing and testing to overcome some minor risks possible through PoS systems.[15]

CONCLUSION

There are further many other required imperatives including the accountable governance or marketing of this technology, complying with ethical guidelines to keep the decentralized nature of the same, long-term agendas to be implement, etc. the whole blockchain system is not perfect but with proper effective measures and innovations it can reach to its goal. Certain cryptocurrencies like Ethereum are example of ethical implications to sustain by diminishing the ethical issues arising out of this technology whereas bitcoin could be example of stagnant on sustainability point of view as its not adopting such measures which would help it to reduce environmental carbon issues. Similarly, there are various aspects of this technology and systems working on this model which are all working independently. It is known for its disintermediation and decentralization yet it needs to have some universal code of ethics or ethical imperatives as mentioned in this article to bind them for positive results of this technology.

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[1]  Nicholas Albrecht, Tens of billions worth of Bitcoin have been locked by people who forgot their key, The New York Times (13/01/2021), available at https://www.nytimes.com/2021/01/13/business/tens-of-billions-worth-of-bitcoin-have-been-locked-by-people-who-forgot-their-key.html, last seen on 06/08/2023

[2] Cara Lapointe And Lara Fishbane, The Blockchain Ethical Design Framework, Researchgate available at https://www.researchgate.net/publication/330069634_The_Blockchain_Ethical_Design_Framework, last seen on 06/08/2023

[3] Ibid

[4] Nikita Malik, How Criminals And Terrorists Use Cryptocurrency: And How To Stop It, Forbes, available at https://www.forbes.com/sites/nikitamalik/2018/08/31/how-criminals-and-terrorists-use-cryptocurrency-and-how-to-stop-it/, last seen on 06/08/2023

[5] Handbook of Research on Blockchain Technology, 102 (Saravanan Krishnan, Valentina Emilia Balas, E. Golden Julie, Harold Robinson Yesudhas, S. Balaji and Raghvendra Kumar, 2020)

[6] Jonathan Reed, Cryptocurrency-Related Crime Boomed in 2022, Security Intelligence (08/03/2023), available at https://securityintelligence.com/news/cryptocurrency-related-crime-boomed-2022/, last seen on 06/08/2023

[7] Michelle Nichols, Exclusive: Record-breaking 2022 for North Korea crypto theft, UN report says, Reuters (07/02/2023), available at https://www.reuters.com/technology/record-breaking-2022-north-korea-crypto-theft-un-report-2023-02-06/, last visit 06/08/2023 

[8] North Korean hackers stole $100 million in recent cryptocurrency heist: Analysts, The Economic Times (14/06/2023), available at https://economictimes.indiatimes.com/markets/cryptocurrency/north-korean-hackers-stole-100-million-in-recent-cryptocurrency-heist-analysts/articleshow/100986727.cms?from=mdr, last seen 06/08/2023

[9] Crypto money laundering rises 30%, report finds, BBC News (26/01/2022), available at https://www.bbc.com/news/technology-60072195, last visit 06/08/2023

[10] Chris Baraniuk, Bitcoin’s energy consumption ‘equals that of Switzerland’, BBC News (03/07/2019), available at https://www.bbc.com/news/technology-48853230, last seen on 06/08/2023

[11] Ethereum’s PoS Solution To Ethical Concerns of Cryptocurrencies Impact On The Environment, Analytics Insight, available at https://www.analyticsinsight.net/ethereums-pos-solution-to-ethical-concerns-of-cryptocurrencies-impact-on-the-environment/, last seen on 06/08/2023

[12] Ibid

[13] Guidelines for Improving Blockchain’s Environmental, Social and Economic Impact, World Economic Forum, available at    https://www3.weforum.org/docs/WEF_Guidelines_for_Improving_Blockchain%E2%80%99s_Environmental_Social_and_Economic_Impact_2023.pdf, last seen on 06/08/2023

[14] Ibid

[15] Ibid