Blockchain technology has come under bad review recently, and people are beginning to question its ethical stakes and moral ground.

 

The solution is found in improving the technologies efficiency, security, and maintaining trust between its users to resolve and avoid any ethical concerns that the technology may bring.

 Despite the scope of benefits blockchain technology brings, there are pathways that may lead to ethical, reputational, legal, and economic risks for organisations and their stakeholders, which need to be addressed.

 

The Four Main Risks of Blockchain

Lack of Privacy

It’s common knowledge that popular blockchains are public and are characterized by their complete transparency and clear accessibility. Yet, discussions of a private blockchain may be on the cards, due to its transparency now becoming a threat to users’ privacy and security.

Take for example Nebula Genomics. This DNA testing organisation uses private blockchain to give patients full control of their genomic data, protecting their privacy when it comes to their DNA. Approaches like this, especially in the healthcare industry, should be strongly considered among other entities in order to protect highly sensitive data. In addition, the creation of a hybrid private-public approach, used by Hashed Health for instance, which gives their patients more control of their data, should be taken into consideration.

 

Blockchain Governance

Blockchain governance is a very complicated affair. It has significant ethical, reputational, legal, and financial ramifications, which need to be properly addressed and governed.

Due to blockchain being decentralised, some users assume it’s for libertarians, that being, all members have an equal say in how the blockchain operates and is appropriately governed. Because of this, great care and due diligence is required in structuring the suitable governance of the technology.

Significant ethical and financial risks can be easily avoided if developers’ values are operationalized into the infrastructures that govern blockchain technology. In regard to the users themselves, leaders must implement a solid framework for mitigating these risks and should consider a plethora of different scenarios which could weaken the technologies infrastructure.

 

Lack of Third-Party Protection

Third-party intermediaries play a vital role in safeguarding customers interests and when transactions take place without a third party, customers are left with no support and aren’t able to seek any guidance.

A recent study from the New York Times revealed that 140 billion USD of bitcoin is locked in wallets whose private keys have been either lost or forgotten. The losing of private keys is a real problem amongst crypto users, and there is no support available for resolving this issue. When you lose a key, it is lost forever. Users of the technology must recognise the risk of not having those safeguards in place and should be completely transparent about the risk.

 

The Zero-State Problem

Zero-state problem occurs when the accuracy of the data contained in the first or ‘genesis block’ of a blockchain is in question. It becomes an issue when due diligence is not properly performed on the data or those entering it make a mistake, whether it is intentionally or by accident for malicious reasons.

In terms of ethical stakes, this becomes an issue with blood diamonds or property. For example, if a government creates a blockchain as the database of record for a land registry, and if the person entering the information into the first block wrongly assigns the parcel of land to the incorrect owners, a serious problem and injustice occurs. Organisations like ZCash have resolved this issue by creating a highly secure privacy-preserving cryptocurrency, with aims of ensuring and promoting trustworthiness of its genesis block.

 

Working Towards an Ethical Framework

Leaders must implement a suitable and sustainable framework with aims to mitigate the aforementioned risks when using blockchain technology.  All of these risks and others should be considered so all possible challenges can be easily and quickly resolved. Leaders should think about the ethical issues, the governance structures, the protective measures to safeguard stakeholders and many other red flags when it comes to protecting the nature of blockchain technology.

 

Date: 26/07/2022 

Source: Reid Blackman, 'Why Blockchains Stakes are so High', HBR