April 17th, 2018
Bitcoin is a controversial digital currency that continues to make news every day. Not many people find Bitcoin beneficial, but the infrastructure which underpins it could be of great use for the financial sector. Bitcoin was introduced for the first time in 2009, since then, it has sparked speculation about the future of finance. The only concern with this digital currency is its fluctuating price that continues to soar and crash, regularly. Despite its volatile nature, this digital currency comes with amazing features that make it ideal for modern-day transactions. The database technology underlying digital currency is steadily gaining interest from some of the largest financial institutes and investment firms in the world.
Similar to enormous ledger, this new “blockchain technology” records and indexes every movement of Bitcoin, thereby creating a searchable database of all transactions that have ever happened in the process. Many traditional digital ledgers record information on a central server, but Blockchain stores these transactions across different networks of systems. These systems are constantly checked and verified by each other.
Distributed systems which dissipate information in this manner overcome a huge challenge for financial institutes. How can critical data be stored safely or securely? Strict regulations exist to ensure firms that handle financial data are doing so in accordance with only the best cybersecurity standards. Even with these requirements, there are numerous instances of financial data breaches.
A few years ago, unidentified hackers were successful in compromising the servers of the Bangladesh Bank and stole a huge amount of money. In the UK, a popular bank was also targeted, which resulted in money being taken from around 20,000 accounts. People put a high amount of trust in these financial institutions and banks-such cyber-security breaches can be devastating the users as well as the bank’s reputation.
Blockchain technology is known for its advanced security features, making it tough to hack. By storing financial information across a different network of computers, the task of compromising data becomes difficult for hackers. In this case, hackers have to breach more than one server; the majority of the network needs to be compromised in order to steal information or data. With Blockchain, hacking a single server is tough, even for the most accomplished of hackers or cybercriminals. To compromise all servers in order to counterfeit records on the blockchain is almost impossible-hackers would have to break every node simultaneously.
High level security features make it highly attractive to popular financial institutes around the world. Bitcoin itself comes with various benefits to such institutes, the technology underpinning the blockchain can be used to establish secure networks for almost any type of asset.
Financial institutes and regulatory boards around the world have started to realize the importance of higher security features. The World Economic Forum is anticipating that almost 10 percent of domestic products will be stored on the distributed ledger by 2025. Many banks, financial exchanges, and regulators started researching ways to adapt this all-new blockchain technology to secure data on bonds, stocks, energy distributed over grids and even property deeds. With such a huge variety of applications, Blockchain technology only challenge is to find ways of packaging it for use in consumer services and products.
The financial services are dominated by a mish-mash of outdated systems that are difficult to maintain and are inefficient. Even though technology is making a dent in the financial sector, it is far from being able to use the latest ideas or concepts. Blockchain technology is opening up new opportunities to disrupt the present financial services and is coming up with new financial solutions for consumers. Research for this new technology may be still in its early stage, but by now it’s clear that this new concept will make transactions faster, thereby keeping data safe from breaches or hacks in the future.