How Explainable AI Can Clarify Blockchain Transaction Auditing – Techopedia
Blockchain technology can provide a range of industries with decentralized and immutable ledger systems, which enhance transparency, security, and efficiency. It can simplify supply chain management, track financial transactions efficiently, and transfer data securely across fragmented systems such as healthcare networks.
One of the key sectors where the technology has made significant inroads is in recording financial transactions. But with the increasing complexity of blockchain ecosystems and the need for regulatory compliance, auditing these transactions has become a challenge.
One potential solution is using explainable artificial intelligence (XAI), which can handle and analyze large volumes of data to help auditors and regulators gain insights into complex transaction histories and verify compliance. However, this raises ethical concerns, as blockchains are designed to protect users anonymity.
Can XAI be implemented in ethical ways? What would this mean for the industry?
Explainable AI is a form of artificial intelligence (AI) and machine learning (ML) designed to develop models that explain the decisions they make. This allows users to understand how and why an algorithm makes decisions, which can help them to make better decisions and increase their confidence in the model. It can also help to identify mistakes and make improvements.
This is particularly important in industries such as healthcare and finance, where it is critical to ensure that decisions are not based on incorrect data or bias. Organizations need to provide transparent explanations of how decisions are made to demonstrate that they are committed to ethical and responsible data management.
When AI and ML are used in auditing procedures, audit evidence standards require auditors to provide appropriate and sufficient evidence to support their conclusions.
By integrating XAI into the auditing process, auditors and regulators can gain deeper insights into complex transaction histories and ensure they comply with regulatory requirements.
Blockchains distributed ledger approach facilitates secure transactions and data tracking. Transactions are processed across a decentralized peer-to-peer network of nodes, and the data is stored and shared cryptographicallyin a way that can ensure it is not manipulated or misused.
Traditional financial audits are relatively straightforward for auditors, as they can quickly gain access to centralized records and databases they need to analyze and verify transactions. However, as a blockchain is not controlled by a centralized entity, it can be difficult for auditors to access information. Additionally, transactions processed on a blockchain can be highly complex, involving multiple senders or recipients and the execution of smart contracts.
Blockchains provide transparency, as the details of each transaction are stored publicly and visible to any network users. This creates a challenge for auditors that need to verify transactions while protecting sensitive data.
A lack of standardization across the blockchain industry for reporting and documentation also presents a challenge. Each blockchain can have its own unique protocol and data structure, making it difficult for auditors to access and analyze transaction data consistently.
The introduction of explainable AI to blockchain technology can change the automation of auditing and compliance.
Blockchain technology provides a secure means of tracking transactions and data in an immutable and tamper-proof system, while XAI can help to automate auditing with efficiency and transparency, bringing tools such as:
ML algorithms can process large volumes of blockchain data in minutes. This is useful for complex transactions and records, where trust is crucial. It also reduces the time and effort required to conduct audits while increasing detection and enhancing accuracy.
XAI can provide auditors with detailed explanations so that they understand why a transaction was flagged as non-compliant or irregular. Auditors can validate the algorithms conclusions to ensure no important or relevant considerations were overlooked.
XAI algorithms can analyze blockchain transactions to identify suspicious activity, anomalies, and potential fraud and then explain how the model detected them. This provides a transparent and accountable approach to fraud detection, which can help organizations to avoid financial losses and improve their compliance systems.
XAI can identify potential system errors and alert users before any damage occurs. This can help to reduce the risk of malicious attacks.
Auditors can use blockchain technology to store and share audit trail records in a secure environment, ensuring they remain accurate and any changes can be traced.
The intersection of XAI and blockchain has potential in several industries. It can be used in healthcare to help providers share patient data securely and understand medical decisions. It has applications in finance to help financial institutions trace transactions and provide secure services to clients.
While there are clear advantages, implementing XAI for tracking blockchain transactions raises important ethical questions, particularly in the context of blockchains core principles of decentralization and anonymity.
Blockchain technology was designed to empower individuals by providing a decentralized and immutable record of transactions, ensuring user privacy, and reducing reliance on centralized third parties. Introducing AI to track and audit blockchain transactions could compromise these principles.
AI could lead to increased surveillance, potentially infringing on users privacy rights. Additionally, centralized oversight of transactions through AI models could contradict the idea of decentralization that underpins blockchain technology.
To address these concerns, any implementation of AI for auditing blockchain transactions must be approached cautiously and with a focus on preserving the fundamental principles of the technology.
It is essential to strike a balance between transparency and anonymity, ensuring that AI-driven audits enhance security and compliance without compromising on the features that set blockchain systems apart from centralized systems.
Introducing XAI-based auditing solutions for blockchain transactions could have far-reaching implications for the industry:
There are clear challenges to auditing blockchain transactions, given the decentralized and complex nature of the technology. Implementing explainable AI can help address these challenges, providing auditors and regulators with insights into complex datasets.
The ethical considerations must be carefully weighed, but responsible integration of XAI into the auditing process could introduce a new level of transparency and accountability to the blockchain ecosystem. Organizations can save time and money while ensuring they comply with industry regulations.
XAI can play an important role in making the use of blockchain technology in critical transactions more trustworthy. There is also the potential to combine XAI and blockchain technologies to drive innovation in creating new applications.
See the original post here:
How Explainable AI Can Clarify Blockchain Transaction Auditing - Techopedia
- AI Compute Bottleneck: Case For Decentralization If Ever There Was One - Forbes - May 18th, 2024 [May 18th, 2024]
- Security Situation and Decentralization: Presidential Office Hosted a Meeting with Alexander Soros Official website ... - - - May 18th, 2024 [May 18th, 2024]
- DeFi at a Crossroads: New EU Regulations Poses Risk to the Future of Decentralization - Coinfomania - May 18th, 2024 [May 18th, 2024]
- zkSync Unveils Final Protocol Upgrade in Anticipation of Token Launch - Coinfomania - May 18th, 2024 [May 18th, 2024]
- What is MakerDAO's Upcoming PureDai and NewStable? - BSC NEWS - May 18th, 2024 [May 18th, 2024]
- 0xResearch Podcast: Ethereum's Staking Debate: Decentralization vs. Security vs. Yield | Hasu & Vasiliy - Blockworks - May 18th, 2024 [May 18th, 2024]
- Reimagining the European Union's Agricultural Policy: A Call for Decentralization - EU Reporter - May 18th, 2024 [May 18th, 2024]
- The Rise of Decentralized Exchanges (DEXs) in DeFi - Robotics and Automation News - May 18th, 2024 [May 18th, 2024]
- Lido DAO gives the first step towards decentralization, price is up - FXStreet - May 5th, 2024 [May 5th, 2024]
- Why Governments Around The World Fear DeFi? - Crypto Times - May 5th, 2024 [May 5th, 2024]
- Doomed To Fail? DAOs Steps To Overcome Pitfalls Of Decentralization - Forbes - March 24th, 2024 [March 24th, 2024]
- PwD Community in Bong Calls for Decentralization of National Commission on Disabilities - Global News Network ... - Global News Network - March 24th, 2024 [March 24th, 2024]
- South Africa: MSF Calls for Decentralisation of Life-Saving DR-TB Services in Rural Setting - AllAfrica - Top Africa News - March 24th, 2024 [March 24th, 2024]
- Understanding Solana Validators And Top 10 Important Things To Know About Them - Blockchain Magazine - March 24th, 2024 [March 24th, 2024]
- Sonorus Crafting the Future of Music on-Chain With AI and Decentralization Standard PR Bitcoin News - Bitcoin.com News - March 15th, 2024 [March 15th, 2024]
- Announcing UniDexAI: Pioneering the Future of Decentralized Trading - AiThority - March 15th, 2024 [March 15th, 2024]
- SendingNetwork Launches Testnet for Bandwidth Mining, Redefining Decentralized Communication Infrastructure - CryptoSlate - March 15th, 2024 [March 15th, 2024]
- Web3 Wallet Wars: Security, Simplicity, And The Race To Dominate Decentralization - The Crypto Basic - January 22nd, 2024 [January 22nd, 2024]
- PO discusses decentralization reform with members of EU Delegation to Ukraine - Ukrinform - January 22nd, 2024 [January 22nd, 2024]
- Crypto Clash Ahead As Bitcoin 'Maxis' Face Institutional Giants Following Bitcoin ETF Approval - The Mountain Press - January 22nd, 2024 [January 22nd, 2024]
- Taking Back the Web with Decentralization: 2023 in Review - EFF - December 31st, 2023 [December 31st, 2023]
- Travel Decentralization: NFTs, Blockchain, and the Future of our Industry - Hospitality Net - December 31st, 2023 [December 31st, 2023]
- Vitalik Buterin Blames Rising Transaction Fees for Web3's Drift from Decentralization - Cryptonews - December 31st, 2023 [December 31st, 2023]
- Decentralization and Digital Power: HighKey CMO Jordan Lintz's Take on the New Social Media Era - Grit Daily - December 31st, 2023 [December 31st, 2023]
- Bitcoin Mining Pool Ocean Successfully Mines Third Block in Ongoing Decentralization Quest - Cryptonews - December 31st, 2023 [December 31st, 2023]
- Web3 needs to regress before we can progress in 2024 | Opinion - crypto.news - December 31st, 2023 [December 31st, 2023]
- The Sam Altmanbacked crypto project Worldcoin announces plans for decentralization as it expands its eye-scanning ambitions - Fortune - December 12th, 2023 [December 12th, 2023]
- The Crypto Paradox: Decentralization and Central Bank Digital Currencies - The Herald-Times - December 12th, 2023 [December 12th, 2023]
- Kelp Is Crafting a Global Currency by Fusing Central Banking Theorem and Blockchain Decentralization - GlobeNewswire - December 12th, 2023 [December 12th, 2023]
- Bybit Celebrates Five Years with a Leap into Web3 Decentralization - Finance Magnates - December 12th, 2023 [December 12th, 2023]
- Solana (SOL) and Cardano (ADA) to be overtaken by Retik Finance (RETIK) in 2024 - Finbold - Finance in Bold - December 12th, 2023 [December 12th, 2023]
- Censorship Climbs on Ethereum as Block Builders Bar US-Sanctioned Transactions - Cryptonews - December 12th, 2023 [December 12th, 2023]
- Microsoft, Tencent and other tech giants join Decentralized Infura ... - Cointelegraph - November 17th, 2023 [November 17th, 2023]
- Web3 Firm Infura Recruits Microsoft, Tencent, and Others To Build ... - Cryptonews - November 17th, 2023 [November 17th, 2023]
- Ethereum L2 Starknet aims to decentralize core components of its ... - Cointelegraph - November 17th, 2023 [November 17th, 2023]
- Business models, fraud and decentralized digital IDs: Future Identity ... - Biometric Update - November 17th, 2023 [November 17th, 2023]
- 3 theses that will drive Ethereum and Bitcoin in the next bull market - Cointelegraph - November 17th, 2023 [November 17th, 2023]
- New York MoMA now has tokenized artworks in its permanent ... - Cointelegraph - November 17th, 2023 [November 17th, 2023]
- Crypto will overcome the stain of FTX and Sam Bankman-Fried - Morningstar - November 17th, 2023 [November 17th, 2023]
- Opinion: CoreLogic's Selma Hepp on the effects of 'pandemic ... - HousingWire - November 17th, 2023 [November 17th, 2023]
- Sergey Nazarov: Only Bitcoin, Ethereum, Chainlink Truly ... - CryptoGlobe - October 1st, 2023 [October 1st, 2023]
- Ethereum decentralization takes hit as Blocknative discontinues its ... - Blockworks - October 1st, 2023 [October 1st, 2023]
- Near Protocol vs Tradecurve Markets: Pioneering the Future of ... - TechCabal - October 1st, 2023 [October 1st, 2023]
- How Crypto is Bridging the Gap Left by Traditional Banking? Crypto ... - Analytics Insight - October 1st, 2023 [October 1st, 2023]
- Blockchain and the scalability challenge: solving the blockchain ... - Finextra - October 1st, 2023 [October 1st, 2023]
- Web3's resilience amidst the bear market: A promising horizon awaits - Cointelegraph - October 1st, 2023 [October 1st, 2023]
- The Complexities Of Crypto: How To Help Break Down The Blockchain - UKTN (UK Technology News - October 1st, 2023 [October 1st, 2023]
- From CeFi to DeFi: How investors can redefine their asset ... - Cointelegraph - October 1st, 2023 [October 1st, 2023]
- The Social Economics of the Old Stone Jug - The Colgate Maroon-News - October 1st, 2023 [October 1st, 2023]
- Wait. Did Education Reform Just Become Inescapable? - The 74 - October 1st, 2023 [October 1st, 2023]
- XRP Decentralization Debates and Its Inflationary Token Distribution - BTC Peers - September 4th, 2023 [September 4th, 2023]
- Lido Finance ETH Staking Nears 33%; Alarming for Decentralization - The Coin Republic - September 4th, 2023 [September 4th, 2023]
- Preserving Decentralization: The Center Consortium's Governance ... - BTC Peers - September 4th, 2023 [September 4th, 2023]
- Experience Better Decentralization with Aerie's Comprehensive ... - Digital Journal - September 4th, 2023 [September 4th, 2023]
- Alibaba's Transformation: A New Era Of Decentralization And ... - Seeking Alpha - September 4th, 2023 [September 4th, 2023]
- Bitcoin ETFs will enhance Crypto Market Decentralization - Tekedia - September 4th, 2023 [September 4th, 2023]
- DeFi 1.0 and 2.0: Understanding the Phases of Decentralized Finance - The Coin Republic - September 4th, 2023 [September 4th, 2023]
- Ethereum Stakers Agree to 22% Self-Limit Seeking Decentralization - The Coin Republic - September 4th, 2023 [September 4th, 2023]
- Decentralization and Bitcoin Mining Pools - BTC Peers - September 4th, 2023 [September 4th, 2023]
- Analyzing Concentration of XRP Among the Founding Team and ... - BTC Peers - September 4th, 2023 [September 4th, 2023]
- Criticisms and Controversies Surrounding USD Coin Adoption - BTC Peers - September 4th, 2023 [September 4th, 2023]
- What Advantage Does Ethereum Have Over Hedera? - Programming Insider - September 4th, 2023 [September 4th, 2023]
- Pros and Cons of XRP Design Compared to Bitcoin and Ethereum - BTC Peers - September 4th, 2023 [September 4th, 2023]
- Web3: Five Key Characteristics of the Decentralized Internet - The Coin Republic - September 4th, 2023 [September 4th, 2023]
- Shiba Inu and Bone Crypto Prediction vs Signuptoken.com: Top ... - Tekedia - September 4th, 2023 [September 4th, 2023]
- Comparing Tether on Ethereum vs Tron Blockchains - BTC Peers - September 4th, 2023 [September 4th, 2023]
- Governance system for local governments - Part 1 - Profit by Pakistan Today - September 4th, 2023 [September 4th, 2023]
- Bitcoin Spark's ICO promises rewarding returns for Early Investors - Captain Altcoin - September 4th, 2023 [September 4th, 2023]
- Ethereum MEV incentives limit decentralization new report shows - CryptoSlate - August 13th, 2023 [August 13th, 2023]
- How to decentralize a prover, according to an engineer who did it for fun - Blockworks - August 13th, 2023 [August 13th, 2023]
- PayPal USD: Boon for Ethereum but not decentralization, says community - Cointelegraph - August 13th, 2023 [August 13th, 2023]
- Safeguarded Token: The Third Way between Decentralization vs. State Protection Part 3 - Modern Diplomacy - August 13th, 2023 [August 13th, 2023]
- Stablecoins need to focus on liquidity, not decentralization ... - Blockworks - August 13th, 2023 [August 13th, 2023]
- Lido DAO: Driving the Decentralization of Ethereum's Proof-of-Stake ... - Auralcrave - August 13th, 2023 [August 13th, 2023]
- Decentralization In Action: Unveiling The Strategies Of Scorpion ... - Tekedia - August 13th, 2023 [August 13th, 2023]
- Pulling Back The Layers of L2 Scaling in Blockchain Networks - Techopedia - August 13th, 2023 [August 13th, 2023]
- How the Blockchain Will Influence the Smart Cities of Tomorrow - Techopedia - August 13th, 2023 [August 13th, 2023]
- Don't Join ThreadsMake Instagram's 'Twitter Killer' Join You | WIRED - WIRED - July 9th, 2023 [July 9th, 2023]
- It's way too soon for a marriage of AI and Web3 - Blockworks - July 9th, 2023 [July 9th, 2023]
- Uphill task to demilitarize and decentralize Thailand's deep South ... - Thai PBS World - July 9th, 2023 [July 9th, 2023]