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Is Blockchain Causing More Cybersecurity Attacks in the Financial Industry?

Patrick Vernon

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.

By Patrick Vernon, Writer
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SWIFT banking hackshttps://www.reuters.com/article/us-cyber-heist-warning/swift-warns-banks-on-cyber Charles Christopher  –  Apr 16, 2018 8:02 AM PDT

SWIFT banking hacks

https://www.reuters.com/article/us-cyber-heist-warning/swift-warns-banks-on-cyber-heists-as-hack-sophistication-grows-idUSKBN1DT012

Eastern International Bank (2845.TW) lost $500,000 in a cyber heist.

Nepal’s NIC Asia Bank lost $580,000 in a cyber heist, two Nepali officials told Reuters earlier this month.

https://en.wikipedia.org/wiki/2015–2016_SWIFT_banking_hack

A $101 million theft from the Bangladesh central bank via its account at the New York Federal Reserve Bank was traced to hacker penetration of SWIFT's Alliance Access software, according to a New York Times report.

https://www.bankinfosecurity.com/another-swift-hack-stole-12-million-a-9121

The attacks, which occurred on Jan. 21, 2015, resulted in the theft of $12.2 million from Banco del Austro, or BDA, in Ecuador.

Meanwhile, a Vietnamese bank recently revealed it foiled a plot to transfer $1.36 million out of its accounts - via the interbank SWIFT messaging system - in the fourth quarter of 2015.

http://www.dw.com/en/hackers-stole-6-million-in-russia-bank-attack-via-swift-system/a-42616207

Unknown hackers stole 339.5 million roubles ($6 million, €4.8 million) from a Russian bank using the global payment network SWIFT, the country's central bank admitted on Friday.

https://www.theregister.co.uk/2017/10/11/hackers_swift_taiwan/

Hackers managed to pinch $60m from the Far Eastern International Bank in Taiwan by infiltrating its computers last week.

"There has been a spate of cyber-attacks against banks in which miscreants gain access to their SWIFT equipment to siphon off millions. The largest such heist was in February 2016 when hackers unknown (possibly from North Korea) stole $81m while trying to pull off the first $1bn electronic cyber-robbery.

SWIFT has, apparently, tried to help its customers shore up their security; it seems the banking sector as a whole needs to be more on its toes to prevent future unauthorized accesses."

As if the current world banking system is immune to hackers, and hacking is limited to just blockchains.

And meanwhile the US Federal Reserve acknowledges the beneficial future of blockchain technology:

https://www.chicagofed.org/publications/economic-perspectives/2017/7

Conclusion
While much work remains to be done, blockchain represents a promising source of future innovation in financial markets. DLT technology possesses the capability to improve the efficiency and security of financial markets, provided it is implemented in the right way. In the near future, we will see the development of specific applications of DLT that are likely to enable better cooperation between the public sector and private sector and improve transparency, trust, information sharing, and audit trails.

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