Albeit blockchain allows for transactions to become public knowledge, the technology can also be used to keep accurate information confidential. Various banks around the world see transaction confidentiality as a primary security concern for embracing blockchain right now. This new report by Greenwich Associates only confirms the financial sector will not adopt this technology anytime soon.
Blockchain and Transaction Confidentiality
Distributed ledgers can be of great value to the financial sector as a whole. More transparency, faster settlement, and no longer relying on centralised parties to verify transactions will shake up finance as we know it today. But there are also some security concerns to take into consideration, such as transaction confidentiality.
A new report by Greenwich Associates goes to show transaction confidentiality is the biggest concern banks have when it comes to the blockchain. The recent DAO and Bitfinex hacks go to show there is a legitimate concern over using this technology in the financial sector. Then again, both attacks were made possible due to sloppy coding on top of the blockchain, rather than a problem with the technology itself.
A total of 134 market participants were part of this Greenwich Associates study, and 56% of them indicated confidentiality is a problem. In fact, 63% of banks and brokers quizzed indicated this is their primary reason for not investing in this technology just yet. Then again, there is also the lack of understanding to take into account, even though the report does not mention that specifically.
The blockchain leaves an audit trail, allowing anyone to see transactions happening on the network in real-time. In doing so, parties and institutions cannot keep transactions confidential, even though there is no personal information broadcasted during this transaction. No one will be surprised to find out banks want anything but their actions to be publicly visible.
At the same time, these drawbacks create new business opportunities. Initiatives such as Chain, Digital Asset Holdings, and R3 CEV want to introduce transaction confidentiality in the blockchain world. In most cases, this will lead to creating private and permissioned blockchains, which may not solve any of the issues currently found in the financial sector.
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