Blockchain is secure, but information needs to be filtered

The blockchain can be immutable and transparent, but that does not mean that all the information recorded on it is true.

The difference between technological security and data reliability was at the center of the panel "Crypto Security: Regulation, Technology, and Trust --- How to Build a Secure Crypto Market?" held this Thursday (13) during Blockchain.RIO.

The discussion featured Bruno Brito, founder and Chief Legal & Regulatory Officer of LexChain; Luiz Souza (Ceifador), crypto investigator; Henrique Oliveira, founder and CEO of Aura Kairos Emet; and Bárbara Brito, founder and Head of Marketing at Sinergius, who was responsible for mediation.

The debate took place at a time of transformation in the Brazilian market, with the entry of the virtual assets sector into a new regulatory phase and companies preparing to operate under the supervision of the Central Bank.

The discussion addressed how far regulation increases market security without creating barriers for companies developing blockchain products.

For Bruno Brito, the two do not need to be at odds. "Innovation does not hinder regulation, nor can regulation hinder innovation," he said.

Brito highlighted the model of public consultations adopted by the Central Bank during the construction of rules for the sector, allowing participation from associations, companies, and society.

In the lawyer's view, this dialogue allows norms to be adjusted without hindering technological development.

"I believe that Brazil has been moving in a very healthy direction in this regulatory aspect," he stated. Blockchain records facts but does not determine truth.

One of the main points of the panel arose from a recurring phrase in the market: "it's on the blockchain, so it's secure." Henrique Oliveira pointed out a problem with this interpretation.

The infrastructure can guarantee the integrity of a particular record once it is inserted, but it does not necessarily verify whether the original information corresponds to reality.

"The blockchain is secure, but not everything that goes into it is necessarily reliable."

Oliveira compared the problem to what already happens with artificial intelligence systems. A model fed with false data can produce false results.

In blockchain, the logic is similar: the technology records what it receives, even when the original information is wrong.

"If I inject it with false data, it will record false data. So, I tend to say that we have something very secure in our hands, but we do not know how to use it. And that makes everything unsafe," he stated.

The discussion led to an important distinction for the market: proof of existence is not necessarily proof of truth.

A blockchain can prove that a particular record existed at a specific moment and preserve its history.

However, this does not automatically transform the content of that record into a true representation of an event outside the network.

"Everything can exist. But what is actually real?" questioned Oliveira.

Transparency changes the work of investigators

If the blockchain does not eliminate the possibility of fraud, its characteristics can, on the other hand, provide new tools for investigators.

Luiz Souza explained that the analysis of a suspicious operation begins with the context. Instead of observing just a single transaction in isolation, investigators seek to understand the interactions of a particular address, its connections, and its relationship with other participants.

From this mapping, it is possible to seek evidence of links to fraud or criminal agents.

"To understand that it is a suspicious operation, we need to understand its context," Souza stated.

According to the researcher, blockchain does not eliminate traditional investigation, but changes the way it can be conducted.

Transparency and immutability allow for the reconstruction of certain movements and their use as elements of an investigation.

The argument also contradicts one of the most widespread perceptions about cryptocurrencies: the idea that transactions involving digital assets would necessarily be impossible to trace.

During the panel, participants highlighted that the characteristics vary according to the asset and the technology used, but that various blockchains allow for tracking publicly recorded movements.

In the experts' assessment, being unaware of these characteristics helps to fuel the perception that the digital asset market would be an environment without controls and inherently geared towards criminality.

"This ignorance ends up leading to wrong premises and conclusions, that it is an uncontrolled environment, it is an environment suitable for crime, it is an environment where anything can happen. And that is not what we live in anymore," was emphasized during the discussion.

Security Begins Before the Authorization Request

For Bruno Brito, another mistaken perception of the market is treating the legal and regulatory areas as final stages of business development.

With the new regulated environment, companies intending to operate as virtual asset service providers need to consider governance requirements, controls, and risks from the structuring of the project.

The problem, according to him, is that some entrepreneurs seek legal support only when they need to prepare documentation to request authorization from the regulator.

"From the beginning, if there had been legal support overseeing all the points to be structured, the project, the business plan, governance, all the risks of the venture, there wouldn't have been that rush to gather all the documents," he stated.

Brito also highlighted that supervision should not be limited to the documentation presented by companies.

The effective functioning of governance structures and controls also becomes important in the regulatory process.