1

The Blockchain Arms Race: America vs. China

March 14, 2018 Topic: Security Region: Asia Tags: ChinaPentagonMilitaryBattlefieldWarTechnology

The Blockchain Arms Race: America vs. China

Disruptive blockchain technology is coming to a gray-zone war near you.

China outlawed Bitcoin in 2017, but now Chinese cyber security experts seem poised to use it for war. A 2018 article in the People’s Liberation Army (PLA) Daily highlights how the technology behind Bitcoin, “blockchain,” will have “military applications…[and] that the future of media war must rely on a specific network media to start.” More troubling though is that it was written specifically for the PLA as a call to action: “the media battle of wars will become an important form of future military struggles. If we do not take precautions in keeping with the pace of the times, we will be subject to control everywhere.” The PLA seems to recognize the importance of this emerging technological capability, but should China be allowed to control the future of information warfare?

Emerging blockchain technology will offer enumerable defensive and offensive tools for military and intelligence operations in the twenty-first century. Whomever masters and weaponizes blockchain first will determine their penultimate power and influence over others. What exactly is blockchain and what does this mean for gray-zone warfare against America and her allies?

Detractors may believe that it is preposterous that some unheard-of-Bitcoin technology (e.g. blockchain) will prove pivotal to the future of warfare. However, with blockchain weaponized and integrated into a specific national strategy, it has the potential to fundamentally alter relations between states, societies and citizens. If properly utilized as an instrument by the Chinese (and other adversaries), it can be used to undermine the United States and her allies by circumnavigating typical security measures that detect and defend against criminal and subversive activities.

The Fundamentals of Blockchain

The reason why Bitcoin—a digitally decentralized currency—is so successful is because of the nature of its underlying blockchain, which ensures the validity and accountability of transactions. Thus, a blockchain, also known as “distributed ledger technology,” is just a “record” that is stored across enumerable computers. It enables the ability to authenticate and provide payment with partial anonymity in a secure way, without the worry of suffering from some Western Union wire fraud or expensive fees. Unfortunately, such secure payment methods present the opportunity for funding covert operations in other countries. Beyond simple monetary transfers, there are also non-economic ways of utilizing this technology as the development of blockchain 2.0 matures, which will impact “every area of finance, economics, and money; hard assets, such as physical property; and intangible assets such as votes, ideas, reputation, intention, health data, information, etc.”

In 2016, three Chinese cyber experts published an article titled “Blockchain technology and its potential military value,” in the journal of National Defense Science & Technology. Their article highlighted the value of blockchain technology, noting the numerous security ramifications, especially in the realm of defensive and offensive cyber operations. In addition, as written in an article for the journal of China Management Informationization, blockchain supports “trustworthiness, reliability, openness, consensus mechanism and smart contract” in business transactions and other dealings where discrete payments are needed. This supporting function of blockchain, if properly manipulated into a cyber weapon by adversaries, could be used to “trick” systems into providing whatever information desired, or worse, manipulate data without being detected. Scholars in India are similarly concerned about blockchain supporting the conduct of military operations, recognizing that as governments and individuals develop quantum computing abilities, blockchain will make it easy to hack into highly secure networks.

Blockchain technology fits neatly into the paradigm of warfare in the “Gray Zone,” where Chinese aggression defines the “ambiguity—about the ultimate objectives, the participants, whether international treaties and norms have been violated, and the role that military forces should play in response.” The uncertain nature of gray-zone warfare is what makes blockchain so appealing as a tool. Adversarial governments and extremist groups can utilize it—with little fear of being caught “red-handed”—to further their interests at the expense of other countries unwilling or unable to stop it.

Weaponizing Blockchain for Gray Zone Attacks?

A U.S. Navy officer is rightly concerned about Chinese blockchain technology. He believes it “has been recognized as having intrinsic value and utility for Chinese defense issues,” and that blockchain “would align with the civil-military application goals tied to the broad informatization campaign” espoused in China’s 2015 Military Strategy. If we accept the notion that China is a rising power, then we should also accept that—much like other historical “rising powers”—China will increasingly want to exercise its instruments of national power in military, economic, and political spheres. China is already showing signs of increasing its regional hegemony in the Pacific, to include gray-zone actions in the South China Sea. The recent gray-zone attacks against Australia and New Zealand indicate how blockchain might work on a global scale, and against the interests of the U.S. and her Western allies.

 

Research on Chinese “influence campaigns” in the Pacific by a professor in New Zealand has already drawn substantial international attention. Anne-Marie Brady did not gain much fame from articles, but the actions of Chinese agents against her is the more important revelation. As far as anyone can tell, Brady’s research touched a “nerve” with Beijing, as Chinese proxies started a campaign to intimidate her. The reason why China had every reason to worry about her work was that she specifically identified Chinese actions to influence public opinion and the political systems in Australia and New Zealand, towards the preferences of China. Brady discovered the paper trail of money leading back to China (and their corporations), whereby China was giving substantial amounts of money numerous political parties in Australia and New Zealand. China was also financially courting current (and former) government officials and public intellectuals in each country as a way of undermining public debates about China. China’s campaign to infiltrate these Western societies and subvert facts, opinions and thoughts about China has chilling ramifications for how blockchain could make future Chinese operations literally impossible to uncover or detect. Despite being caught, it is unlikely China or others will stop their subversive operations against any countries that might oppose their rise to power. If anything, it will likely accelerate Chinese attempts to be more covert with their “media wars” with the West.

What I am about to propose is purely speculative, but these recent “sharp power” actions by China appear to be an attempt at undermining civil society and democracy in the West. It is vital to recognize this for what it is: China is attempting to alter public debates and perceptions about China, so that it can undermine the democratic process as “true” facts and opinions merge into whatever Chinese operatives want.

 

With blockchain added to China’s cyber arsenal, “gray zone” actions against the West are going to escalate, and with growing success, China’s global power and control over information and narratives will grow in unison.

These are three hypothetical ways in which blockchain could be integrated into gray-zone tactics.

1 - Espionage: China could securely pay trusted agents in Western societies. Such payments would be untraceable. Such Chinese intelligence agents could—depending on blockchain encrypted communications—pursue actions meant to sow disunity, political polarization, or shift opinions towards China’s preferences. This could come in the form of providing significant monetary contributions to extremist political parties on the left and right side. It could also include providing funding to civil society groups, such as the National Rifle Association (NRA) and Black Lives Matter at the same, as a way of creating societal strife, which can disrupt policymaking and the democratic process. Such actions like these would be quite a remarkable strategy and shift in tactics. Instead of trying to support civil society groups and organizations towards the preferences of China, such an approach would just fragment and weaken the country, as divisive and polarized politics would make it difficult for elected leaders to accomplish anything.

2 - Security Protocols: If properly implemented by Chinese intelligence and security agencies, they could essentially make their state secrets impenetrable. While I am not suggesting that the West should be trying to electronically infiltrate Chinese systems in an offensive fashion, it would at least serve as a future deterrent to Chinese gray-zone actions. Already China has been identified on numerous occasions for conducting information collection operations (i.e. stealing classified and sensitive business information) that have relied on cyber warfare tactics to steal technology from Western governments, militaries, and commercial companies (to include the military-industrial complex). Even worse, the infamous 2015 OPM hack appears to have helped Russia and China target and remove U.S. spies working in their respective countries.

3 - Data Manipulation: As increasing numbers of governments, militaries, and companies transition to defensive cyber blockchains to protect vital data, secure communication, and other information; it could all be eventually compromised by quantum computing. Data protection through blockchain technology would be established through public key cryptography and the user storing their private key. However, with a weaponized cyber blockchain in conjunction with a quantum computing algorithms, one could infiltrate such cryptographic systems by reverse engineering a private key. (The technology for quantum computing is still many years away from reaching executable performance, but it should be noticed that China is investing significantly in the technology). While it would require the penetration of 51 percent of distributed ledger operating systems to be a successful attack, this could occur in the near-future if adversarial intelligence agencies focused on this. If the weaponization of blockchain manipulation occurs, it means that electronic election systems—reliant on blockchain—in the West could be eventually compromised, allowing foreign adversaries to “pick-and-choose” winners.

Each of these scenarios are within the realm of possibility. If China could integrate blockchain 2.0 (and possibly quantum computing) into their security and intelligence operations, they could leverage American structures and systems against the U.S. and her allies.

Conclusion

Disruptive blockchain technology is coming to a gray-zone war near you. China and other foes will use Bitcoin tech against America and her allies. Defense communities in the West will need to adapt to this troubling reality that gray-zone warfare will be harder to detect and deter. Moreover, besides state threats, Bitcoin tech can make it easier for terrorist groups and violent non-state actors (e.g. criminals, proxies, etc.) to operate, since it can be used to hide large transfers of capital and allow them to communicate in an uncrackable fashion.

Fortunately, the West is slowing seeing the value in blockchain for military and intelligence purposes: the Pentagon is looking into securing databases, the American Defense Advanced Research Project Agency (DARPA) is developing a secure battlefield communication system, and Estonia has rebuilt its government around the technology. These are promising signs, but whoever weaponizes blockchain the fastest (i.e. establishing supremacy in this emerging technology), will undoubtedly achieve the sought after Monroe Doctrine in Cyber Space.

Modernizing defense systems with blockchain in the West should be a priority. However, there will also be a need to “harden” and “fortify” civil society against foreign subversion that might rely on blockchain to infiltrate and spread propaganda. Additionally, the prospect of untraceable monetary donations to influence important individuals, politics, and policies in the West, poses tremendous challenges to the workings of liberal Western democracies.

While my three blockchain examples were hypothetical, there is no evidence to suggest this has occurred yet. Unfortunately, it is entirely logical and intuitive that adversaries are working on these sorts of tactics, especially in a gray-zone war context of the twenty-first century. Hard military power appears to be exercised less by rising powers such as China, and thus far, Chinese behavior in the international community appears bent on shaping narratives, politics, and negotiations in favor of their own interests—all without firing a weapon. We will have to wait and see what the official U.S. response to this growing cyber threat as the recently passed National Defense Authorization Act (NDAA) included verbiage about blockchain for the first time ever in a NDAA, and it directed the Department of Defense to provide a briefing to Congress by May of 2018 on blockchain cyber capabilities (offensive and defensive) and how allies and adversaries are using it for security and intelligence purposes.

Jahara “Franky” Matisek is an officer and pilot in the U.S. military and is a Ph.D. Candidate in Political Science at Northwestern University. Mr. Matisek is the coordinator for the War & Society Working Group at the Buffett Institute for Global Studies and is a contributing editor at Over the Horizon: Multi-Domain Operations & Strategies. The views presented in this article are those of the author and do not necessarily represent the views of the Department of the Air Force, U.S. Department of Defense, or U.S. Government.

Image: A man holds a laptop computer as cyber code is projected on him in this illustration picture taken on May 13, 2017. Capitalizing on spying tools believed to have been developed by the U.S. National Security Agency, hackers staged a cyber assault with a self-spreading malware that has infected tens of thousands of computers in nearly 100 countries. REUTERS/Kacper Pempel/Illustration​