There’s a lot of misunderstanding about blockchain. A recent study by HSBC, for example, found that 59 percent of customers around the world had never heard of it. Yet, while that alone is quite telling, it’s probably more alarming to consider the fact that very same poll revealed that 80 percent of people who had hard of blockchain did not understand what it is.
This level of confusion isn’t confined to the general population either. Politicians in charge of setting the law around this sort of technology and some traders who are perfectly at home with currency futures are equally in the dark about what this technology is and what it means for the financial industry.
There are some who fear that this technology – a digital transaction ledger in which each block is protected by cryptography – poses a security risk. That hasn’t been helped, it has to be said, by a number of scams in this market which have caused some to associate blockchain with risk.
CoinDesk, for example, demonstrates seven key incidents that attracted attention in 2017 alone. The incidents it highlights — including wallet hacks, ICO fraud and software bugs — cost investors nearly $490 million.
But, while it’s understandable that these sorts of incidents cause alarm, the general fear around blockchain is misplaced, probably not helped by the fact that this technology is proving ‘disruptive’ to the old order, promising drastic change to the speed and ease of money transfers.
Far from being the cause of problems for the financial industry, this technology might well offer a solution to make the industry safer.
Medium writer Redactor demonstrates four key ways in which blockchain technology is improving cybersecurity. These are:
- Mitigating attacks such as DDoS with a decentralized structure and by not having a single point of failure
- Protection for IoT devices, which can communicate with enterprise-defined ledgers based on blockchain
- Providing transparency with permanent records that cannot be altered without creating a data trail (in order for transactions to be finalized they need to be approved more than half of the systems in a network and, when this occurs, the block is given a time stamp and is immutable)
- Allowing for digital identities, greater encryption and more robust authentication
It’s fair to say that blockchain is here to stay. It isn’t ‘just’ the technology that underpins Bitcoin and other cryptocurrencies — although this is probably what its most known for — but it is a form of technology that has much wider potential for use in the finance sector and beyond.
Rather than ignore it — or treat it as a security threat — the industry needs to identify the potential of blockchain and set to work to use this as a way to add security. This, increasingly, is the case, with banks and big tech firms working on ways to harness blockchain to shelter the data of financial firms and customers alike.
Clearly scams shouldn’t be ignored — and work needs to be done to crack down on these — but nor should the positive potential of blockchain as a force for security.