All About Blockchain Security 2 | Blockchain Security Benefits In The Finance Industry| Homework

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INTRODUCTION

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Since the inception of the experimental cryptocurrency (Bitcoin), it has gained massive global acceptance as a legal tender for payment of goods and services. This is mainly because it is limited, decentralized and anonymous. Similarly, newer blockchain experiments have gained huge success over the years. This is simply due to the security promise they present with the opportunity to solve the loopholes within industries such as cyber attacks and computer hacks.

Whiles many other industries still have some catching up to do, various sectors have started to implore this technology to secure confidential information, safeguard sensitive records and strengthen privacy issues pertaining to traditional methods.

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Transformation of financial institutions toward blockchain based operations

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Currently, most of these industries are looking to adopt blockchain technology due to the several security benefits associated with them. Some of them are as follows.

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SECURITY BENEFITS ASSOCIATED WITH BLOCKCHAIN TECHNOLOGY IN THE FINANCE INDUSTRY

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Due to the consensus method utilized by blockchains, transactions are quite secure with better record keeping ability. This coupled with several reasons below has given it the ability to enhance the security of almost all industries around the globe. Financial institutions in particular can really maximize blockchain's potential in several aspects. Here are some advantages that can be derived.

• Encryption & Validation: Blockchain transactions are encrypted and distributed on a ledger across various nodes that stay on the cloud. Due to this, we can actually cross-check the file signatures on these ledgers to make sure there has been no alteration. Once tampering occurs, the signature is rendered invalid. This therefore makes it ideal for banks/financial institutions to utilize blockchain ledger to cross-check third party transactions to prove their validity.

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• Decentralized: Data is not stored on a single computer, server or operator but is rather broken down and distributed across various nodes. This eliminates the possibility of a single point failure as each node has a complete copy of the node. Data cannot therefore be manipulated by a single individual or entity. Also, since financial investors have their private keys with them, they have sole control of their finances and the institution itself wouldn't be liable to any asset loss.

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• Relatively Impossible to Hack: Traditional banks and financial entities poses a cyber security threat with a central repository or data storage. This is because during a hack, data can easily be manipulated and corrupted. Blockchain on the other hand distributes data across several ledgers making it quite challenging to alter without drawing suspicions. Also, confirmation of transactions take place across various nodes on the network which has to be hacked simultaneously. This is not quite feasible yet thereby enhancing security.

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• Trustless But Safe Transactions: Although there is no middle man or intermediary between transactions, payment is quiet safe and secure. This means that you need not to trust the sender of the tokens or the authenticity of the tokens as they are confirmed and validated automatically on the blockchain network. This therefore removes the stress in running of background checks on finances since every payment is already verified and signed.

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• Safe & Better Record Keeping: Blockchain data is stored on chain and within various blocks after confirmation by the network. This is then distributed across various ledgers on various nodes. The mathematical algorithm underlying this process then makes it extremely difficult to be altered.

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IMPACT OF CRYPTOCURRENCIES ON FINANCIAL INSTITUTIONS

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As blockchains and cryptocurrencies present a great potential for growth in the financial sector, there are other aspects we must take a closer look at as well. As such, it now becomes quite pertinent to look closely at the entire package and weigh its pros and cons before adopting them into our finances.

PROS

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• Ease of Accessibility: This is because a large amount of our global population have internet access, the underlying factor for accessing any blockchain network in their various countries. The incorporation of crypto in our finances and banking sectors therefore removes restrictions associated with geographic locations increasing accessibility.

• Fast Payment: Usually, banks and financial institutions tend to go through several procedures causing unnecessary delays before payments can be received. This creates some level of inconvenience to most customers especially for cash they readily need. Crypto transactions therefore solves this problem since the custodian pays at their convenience which is instantly delivered.

• Low Fees: Bank investors usually incur losts in the transaction fees it takes to process certain amounts of cash during bank transfers. This creates a real menace for numerous customers who tend to look for means to mitigate these huge fees. Transfer of cryptocurrencies only have minor charges mainly miner's fee. Its adoption therefore saves financial institutions loads of customers who would otherwise be lost.

• Better Privacy: Crypto currencies have safeguarded the private information of both the sender and receiver of any transactions. This is simply because you only need the wallet address of the receiver in order to issue payment unlike the traditional banking system that requires extra information about the individual before payment can be processed.

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CONS

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• Ease of Crime Settlement: This is because the blockchain technology behind most cryptocurrencies makes it extremely difficult to be hacked. As a result people on the dark web and conspirators now have easier means of making payments anonymously without leaving a paper trail as you would find in traditional banking methods.

• Restructures the Entire Financial Operations: At movement and oversight of finances was done by a central body which is able to keep records and accounts for every dime passing through their institution. Now, the whole system would have to be restructured since it is now power has now been vested unto individuals to take charge of the operations of their own assets.

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CONCLUSION

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Blockchain and cryptocurrencies have a huge role to play in the financial industry in this modern day and age. This is because they solve several shortcoming of the traditional financial world while ensuring transparency in all dealings. Its adoption will also ensure global ease of funds transfer and present banks the opportunity to increase their earning potentials by holding these assets.

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Thank you for your attention.

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I would appreciate your thoughtful contributions in the comment section as well. Thank you for your atttention.

To the attention of professor @gbenga