Blockchain Technology: Is it completely foolproof?

Speed and efficiency are two of the most important cornerstones of the financial industry. To execute transactions at brisk pace while harvesting innumerable amount of data— financial companies from time to time adopt disruptive technologies to streamline operations.

Algorithm trading— those highly-advanced, automated but complex tools–allows traders to execute profitable trades at a lightning speed; cloud computing provides firms with ageing servers and networks, a disruptive model by facilitating shifting data from data centers  to cloud, hosted by external service providers.

But the financial world is very complex, which has to guard not only against multiple risks like regulatory risks, macroeconomic risk, and technological risks but also improve its productivity, at the same time.

This is why innovation at regular intervals, especially on the technological front, stands as the best way forward for the financial industry.

Blockchain technology is the latest buzzword in the financial industry. It is a public ledger, which records all bitcoin transactions that were executed. It is regarded as a breakthrough innovation since it stands as the evidence of all bitcoin transactions on the network and at the same time it reduces or completely knocks-off the need of intermediaries and back-office functions.

Banks lately have been keenly adopting this technology as they perceive it helps aligning all the varying data systems with one shared standard, which in turn, result in increased productivity.

But here comes the challenge. Data is now the biggest asset of banks and financial institutions. In order to prevent any loss of data, firms have to constantly reinforce their IT systems in vastly expanding but increasingly risk-prone cyberspace. The blockchain technology has its vulnerability. If a malefactor is able to breach any of the decentralized databases in the system, say for instance, an executable cryptogram and fed with corrupt data, it can wreak havoc in the entire system. You see, the whole essence of this protocol is that financial institutions should have a standardized data system (data synchronization); but if any of the link in the chain fails to control cyber risks, the technology may fail to bring the desired outcome.

ARCON is a leading enterprise risk control solutions provider, specializing in risk-predictive technologies. ARCON | User Behavior Analytics enables to monitor end-user activities in real time. ARCON | Privileged Access Management reinforces access control and mitigates data breach threats. ARCON | Secure Compliance Management is a vulnerability assessment tool.

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