Blockchain Technology Offers Security Benefits and Risks
Blockchain has been touted by some as the future of banking. As an emerging technology, it is poised to transform the finance industry and has a variety of use cases in other markets as well. The technology offers a number of benefits from a security standpoint, but also has its own share of vulnerabilities.
Decentralization is key to blockchain technologies and platforms, and data is stored in blocks throughout a decentralized database. No single person or entity is in control of the data, and it can not be erased or tampered with. This makes blockchain a transparent platform for financial transactions as well as cryptocurrency.
Among its numerous benefits, blockchain reduces cybercrime and fraudulent activity since a decentralized database is more resistant to breaches and hacking. Because it offers transparency, blockchain is useful for pinpointing anomalies in banking activity and can aid in quickly finding criminal activity.
Blockchain technology also improves speed throughout the financial industry because it runs on real-time payment executions. Banks have already moved to try out the technology, and in April the European Investment Bank registered a two-year digital bond on the public Ethereum blockchain network. The bond yielded more than $120 million and drove the price of Ether, the second-largest cryptocurrency, to a record high.
Blockchain is not impervious to fraud and cybercrime, however, and there are a few areas where businesses need to be diligent when adopting the technology. Endpoint vulnerabilities are one of the key ways hackers access any network, and blockchain is no exception. An unprotected phone or PC can provide criminals with the keys to access a blockchain. While they won't be able to change or delete data stored on the blockchain, they will be able to see and access sensitive information.
Blockchains are also susceptible to distributed denial-of-service (DDoS) attacks that can overload the blockchain with traffic requests and irrelevant data. This type of attack causes the blockchain to max out its server processing power and could result in transactions losing connectivity to the blockchain. An additional security concern comes from banks having relationships with third-party blockchain companies. If these businesses fail to have the right security in place they run the risk of exposing blockchain keys and enabling a point of entry to the database.
While the security risks of blockchain shouldn't be overlooked, its benefits far outweigh them. The technology continues to grow and widespread global adoption is already underway.
Edited by Luke Bellos
