Why Store Data on a Blockchain?

by Emie-Claude Lamoureux

Emie-Claude Lamoureux is the PR Director of MLG Blockchain Consulting

Data storage and record keeping industries are susceptible to external and internal problems. From the outside, an attacker finds it advantageous if they can breach a system and the data is stored in a centralized location. From the inside, it is not difficult to manipulate data or a record with fraudulent information. In most industries, businesses are structured in a way that one individual will never have enough power to make a significant change that goes undetected, but at the same time,  overriding controls, illicitly changing data, and deleting official records still happens.

In March of 2017, TD bank was under fire for a scandal they were involved in. According to the Financial Times, TD employees regularly broke laws out of fear of being fired.  One employee told Canadian Broadcasting Corporation, “I’ve increased people’s lines of credit by a couple thousand dollars, just to get SR [sales revenue] points.” Another said she increased customers’ overdraft protection amounts without their knowledge, and increased their TD Visa card limits to earn points towards her sales revenue target.

Although a bank should be ethical, reputable, and trustworthy it is sometimes the case that they are not.

How to Combat this Problem

But of course, when a problem exists, there is going to be individuals looking for the solution. The data and record manipulation problem is being addressed by several companies who see ways to provide a solution; IBM and RecordsKeeper have both created their own blockchains to bring transparency to the data storage and recording keeping industries.

Deterring Fraud and Manipulation

deterring fraud and manipulation.jpg
Source: SlideShare

When data is stored on a blockchain, it becomes secured by cryptographic proofs that take computational resources and large amounts of energy to solve. Interactions that occur over a public blockchain network are stored in blocks— a record of transaction history that is assigned a unique hash and linked to the hash in the block before it. The result is a continuous chain of transactions that becomes exponentially difficult to breach or manipulate. This is because you would have to crack the encryption that secures the ledger, opposed to traditional methods of record keeping, in which a record is supervised by an individual who can easily remove a page or portion of a ledger, and replace it without going detected. For example, an accountant could rip out page 10 of their general ledger, and easily insert a foreign page 10 from another ledger. If the transactions were of the same nature and the numbers were changed by the slightest bit, this would make it very difficult for the change to go detected. On a blockchain, this is not an easy feat to accomplish.

To manipulate, illicitly change, or delete data on a blockchain, the unethical actor would need to recalculate the hashes of the blocks in the chain, so that the transaction history within the block and the previous hash links up to the rest of the ledger in a way that is mathematically sound– in other word, you would need to re-mine every block.

A Nearly Immutable Ledger

A nearly immutable ledger.png
Source: Draglet

Because you would need to re-mine every block, it is exponentially difficult to alter the recorded data on the ledger while keeping all of the fraudulent data in line with the networks consensus algorithm. On the RecordsKeeper blockchain, each record uploaded to the blockchain or transaction with another peer is given a unique hash ID. If the contents of the record or transaction are changed by even one character, an entirely new hash will be generated for that piece of data. This makes blockchain technologies like RecordsKeeper an effective solution in the data and record keeping industry.

If data is not secure, then a hacker can make off with everyones data if they force their way into the centralized database.

If there is a mechanism in place that makes it easy to tell when data has been altered or deleted, incidents like the TD scandal might have been prevented. TD’s customers would have been able to see that the unique ID of the services they signed up for, did not match up with the unique ID of their services after the TD sales representatives illegally altered their accounts.

In the auditing, data storage, supply-chain, banking, and finance industries, it is important that the data being transmitted is truthful and securely stored. If the records were dishonest then businesses could end up in big trouble when an auditor comes and the data on the ledger does not add up; the financial reporting council fined PricewaterhouseCoopers LLP 5.1 million euro for misconducting an audit that took place in 2011. If data is not secure, then a hacker can make off with everyones data if they force their way into the centralized database. Data storage and recording keeping industries are often responsible for safeguarding sensitive personal information such as licenses, financial information, social security numbers, and ownership titles. That is why businesses have been exploring blockchain technologies to secure their data and keep their records pristine; because a blockchain provides full transparency and lets users know they are working with unmanipulated data.