Cybersecurity vulnerabilities in certain segments of the financial services industry

Blockchain for Smart Cities: A Potential Solution to a Security Problem

Student

Briefing Paper

WRTG 393

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Executive Summary

The emergence of Internet of Things (IoT) technologies has given rise to the concept of the

smart city. Cities have varied services and functions that demand a precise set of controls. Smart

cities control the usage of these services through IoT technology. Connecting such services and

functions through the use of IoT technology allows city services to be more efficient. For

example, cities can have smart electrical grids that render improved efficiency as they control the

loads at different times of the day through IoT technology. Cities can have smart parking meters,

allowing residents to pay for parking with IoT technology through their smartphones rather than

with coins.

However, using IoT technology in this way means more security vulnerabiliites. Hackers can

gain access to personal data through IoT devices. The reason that hackers can access the system

is that different IoT devices are developed by various manufacturers, different firmware is

involved in their construction, and various sensors, scanners, and surveillance instruments are

used by IoT devices. This plethora of standards causes vulnerabilities when IoT devices are

connected to cities’ infrastructure. As a result, opportunities for cyber criminals abound.

Blockchain technology offers a promising security solution for smart cities in connecting IoT

devices. Blockchain technology is decentralized, as opposed to traditional third-party networks

that require a central authority for oversight. The decentralized nature of blockchain technology

renders it more secure than traditional third-party platforms. Blockchain technology is a

promising solution to the security vulnerabilities that smart cities introduce.

The Problem

A smart city, according to Shea (2020), is "a municipality that uses information and

communication technologies (ICT) to increase operational efficiency, share information with the

public and improve both the quality of government services and citizen welfare" (par. 1). The

concept of the smart city has emerged for various reasons. Population growth in cities is one

factor. It is estimated that more than 68% of the world’s population will live in cities by the year

2050 (Vuppuluri, December 3, 2020), leading to the need for more efficient services, more

seamless forms of payment, and more sustainable development in cities. Furthermore, according

to Bhushan, Khamparia, Sagayam, Sharma, Ahad, and Debnath, (2020), the need for

sustainability is an important factor in the rise of smart cities as energy distribution, and natural

resource usage need to be applied in efficient ways.

IoT technology is crucial for the development of efficient, smart cities. IoT technology and

wireless communication have allowed cities to interconnect devices and transmit data efficiently.

With this technology, a resident can rent a bicycle, pay a parking meter, and obtain traffic

information all by using an app on a smartphone. Electric grids can be contolled wirelessly to

improve efficiency. Sewer-line routing can feature sensors that communicate with each other and

redirect water flow to prevent flooding. These are but a few of the services that IoT technology

can improve for city residents.

However, as noted in the Waltonchain white paper (2018), the current arrangement for IoT

technology involves various stakeholders whose relationship with one another is uncertain at

best. With various stakeholders collaborating with their IoT devices, one IoT service provider is

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needed to make sure that trust is established. The Whaltonchain white paper notes that this

“significantly reduces the true commercial value of the Internet of Things applications” (p. 2).

Moreover, Gilder (2018) outlines the security problems with a central service provider:

Centralization tells thieves where digital assets are most valuable and where they are. It

solves their most difficult problems. Unless power and information are distributed

throughout the system peer to peer, they are vulnerable to manipulation and theft from

the blenders at the top (p. 49).

Figure 1 demonstrates the traditional management of IoT services. The third party overseeing the

IoT hub represents a centralized management of the IoT services. As noted above, this model is

ripe for hackers to attempt to break in and access personal information.

Adapted from Pauw, C. (2018) How significant is blockchain in Internet of Things? Cointelegraph.

https://cointelegraph.com/news/how-significant-is-blockchain-in-internet-of-things

Overall, smart cities are more efficient for residents, but also more vulnerable to hackers. The

traditional model of connecting IoT devices leaves municipalies at risk for data breaches.

A Possible Solution

Blockchain technology decentralizes the control of IoT infrastructure and creates a more secure

connection through which IoT devices can communicate.

In blockchain technlology, the terms hash, block, and blockchain are pivotal.

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• A hash is like a fingerprint is to a human being. It is a 256-bit number that must start with

zeroes. The hask identifies the block and its contents, just as a fingerprint identifies a

human being.

• A block is a record. It can be compared to a page of a ledger. It contains a collection of

data, a 32-bit number called a nonce, and a hash.

• A blockchain is a chain of blocks, a distributed ledger. Each block points backwards to

the block before it. This linking of the blocks keeps the blockchain secure in that it is

next to impossible to alter the data inside existing blocks in a blockchain.

Hassan (2020) points out the connection between the hash and the block, noting that hashing is

fundamental to blockchain technology because the header of the block features the hash of the

current and the previous block. Thus, stored hashes are used to create the blockchain.

Therefore, in a blockchain, the further one goes back in time, the harder it is to make a change.

If a system is operated on a blockchain technology, the system will resist change. This enhances

the integrity of the system. Kotow (2019) explains this concept:

… the hash of a previous block in a sequence is a tamper-proof sequence because as a

function of the design, a hash is very sensitive. So, to change any variable of any one of

the hashes in a given block would cause a domino effect, altering all of the previous

transactions in the block.

A comparison can be made to a Google Doc. When a Google Doc is shared among several

people, everyone can make modifications to the Google doc, and all modifications are recorded.

This process is similar to what occurs in a blockchain. In a blockchain, encrypted blocks of data

are chained together. The ledger of changes in the blockchain are transparent so that all viewers

can verify the integrity of the document.

Lage (2019) notes the security inherent in this system, pointing out that a hacker, in order to

modify one transaction in the blockchain, would have to modify each subsequent block in the

chain as well, resolve inconsistencies in every block, and then appeal to all participants in the

blockchain that this new blockchain is authentic and maintains integrity. Lage maintains that the

sheer amount of computational work and skill and the electrical power required to conduct this

operation renders it next to impossible. The decentralized, participatory nature of blockchain

technology is why advocates of blockchain technology argue that it is inherently secure.

Figure 2 demonstrates the decentralized nature of IoT networks in a blockchain framework. With

blockchain technology, no centralized monitoring is necessary. Data is decentralized, and the

system is difficult for hackers to break into.

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Figure 2

Internet of Things through Blockchain

Taken from Van Dem Dam, R. (2015). Rebooting the IOT – ACC Conference.

https://www.slideshare.net/belive/rebooting-the-iot-acc-conference

Blockchain is often associated with cryptocurrencies such as Bitcoin. The reason for this

association is that blockchain technology was introduced by Nakamato in 2008 as a form of

decentralized data sharing in the adoption of cryptography technology (Ferrag et al., 2018).

However, in recent years blockhain technology has been applied to and considered for other

applications, including Internet of Things devices, intelligent transportation, and precision

agriculture, to name a few (Ferrag et al., 2018).

Advocates of blockchain technology maintain that the ability of all parties to verify data, instead

of a centralized party making sure that the data maintains its integrity, is a key component to the

appeal of blockchain technology. Referring back to Lage’s (2019) point, it is nearly impossible

to hack a blockchain because of the hashing properties inherent in the system, the computational

skill and time involved, and the electrical power demanded.

Summary

Blockchain technology represents an extremely promising network architecture for smart cities.

As urban centers seek to enhance services for their residents, increase their sustainability, and

adopt innovative IoT-based solutions, the decentralized features of blockchain demonstrates

advantages over the traditional centralized networking systems. As cities increasingly rely on

interconnected IoT devices, the need for trust among these devices, and the manufacturers that

produce them, increases.

Blockchain technology, according to many observers, is inherently more secure than centralized

systems and has the advantages of being more efficient because of its seamless communication.

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References

Bhushan, B., Khamparia, A., Sagayam, K. M., Sharma, S. K., Ahad, M. A., & Debnath, N. C.

(2020). Blockchain for smart cities: A review of architectures, integration trends and

future research directions. Sustainable Cities and Society, 61.

https://doi.org/10.1016/j.scs.2020.102360

Ferrag, M. A., Derdour, M., Mukherjee, M., Derhab, A., Maglaras, L., & Janicke, H. (2018).

Blockchain technologies for the Internet of Things: Research issues and challenges. IEEE

Internet of Things Journal, 6(2). https://doi.org/10.1109/JIOT.2018.2882794

Gilder, G. (2018). Life after google. The fall of big data and the rise of the blockchain economy.

Regnery Gateway.

Hassan, M. U., Rehmani, M. H., & Chen, J. (2019). Differential privacy in blockchain

technology: A futuristic approach. Journal of Parallel & Distributed Computing. 145:50-

74. doi:10.1016/j.jpdc.2020.06.003

Kotow, E. (February 26, 2019). What is blockchain hashing? https://hedgetrade.com/what-is-

blockchain-hashing/

Lage, O., de Diego, S., Urkizu, B., Gómez, E., & Gutiérrez Agüero, I. (2019). Blockchain

applications in cybersecurity. In C. Thomas, P. Fraga-Lamas, & T.M. Fernandez-

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Pauw, C. (2018) How significant is blockchain in Internet of Things? [Online image].

Cointelegraph. https://cointelegraph.com/news/how-significant-is-blockchain-in-internet-

of-things

Shea, S. (July, 2020). Smart city. https://internetofthingsagenda.techtarget.com/definition/smart-

city

Van Dem Dam, R. (2015). [Online image]. Rebooting the IOT – ACC Conference.

https://www.slideshare.net/belive/rebooting-the-iot-acc-conference

Vuppuluri, P. (December 3, 2020). Investing in innovation: The rise of the smart city. Forbes.

https://www.forbes.com/sites/forbesfinancecouncil/2020/12/03/investing-in-innovation-

the-rise-of-the-smart-city/?sh=58b4c5e75ba6

Waltonchain, (2018). Waltonchain white paper V 1.0.4. The Waltonchain Team.

https://whitepaper.io/document/30/waltonchain-whitepaper

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