Enterprise blockchain is reshaping finance for the better according to Ericsson head of Blockchain Business Development in today's blog got me questioning the authenticity of his report in late June. Part of it is cited below.
Financial transactions across the world today are becoming more efficient thanks to decentralization and peer-to-peer interchanges, made possible by blockchain and distributed ledger technologies. By design, these technologies have proved very effective in simplifying traditional transaction processes and enabling instant payment solutions globally.
Although blockchain evolved with smart contracts several years ago, opening the door for blockchain to be deployed across a wider variety of industries, banks and financial sectors still represent by far the highest share of blockchain deployments today, mainly for clearing settlements, cross-border payments, and digital identity management. According to a report by Jupiter Research, blockchain deployments will enable banks to realize savings on cross-border settlement transactions of up to USD 27 billion by the end of 2030 - reducing costs by more than 11 percent.
Decentralized finance, also known as DeFi, is the umbrella term used for peer-to-peer financial services by using blockchain technology. This makes it an alternative financial system that can compete with centralized services in terms of accessibility, resilience, and transparency in a peer-to-peer fashion.
Benefit of Enterprise Blockchain for finance
Dedicated blockchain enterprise platforms have the potential to change how businesses operate globally, with the ability to create bridges based on transparency, security and trust with other companies, industries and economies across the globe.
Here are some of the benefits that blockchain can bring to today’s businesses and their value chains:
Trust and transparency with respect to privacy: The shared and immutable source of truth enables all parties in a business network to collaborate, reach agreements and manage selective data, while maintaining integrity and confidentiality.
Security: There is no single point of failure due to its distributed architecture, reducing the need for data intermediaries. “It is tamper-proof against fraud and malicious third parties, making it practically impossible to manipulate or hack.”
Business logic programmability through smart contracts: Blockchain technology supports business logic implementation and automation through programming code, validating each step of the business process with accuracy, security, and step-by-step control.
High performance: The modern private blockchain platforms are engineered to sustain hundreds of transactions per second as well as periodic surges in network activity.
Though this read looks very interesting and provides an account of how the system works, it still leaves me curious as to how safe and transparent it really is. My major concerns are if international authorities are behind the system, is it conforming to legal requirements, and can digital currency disappear without having any form of protection policies in place. The above article stated trust is part of the package, and furthermore it is tamper-proof against fraud and malicious third parties, making it practically impossible to manipulate or hack.
I researched the web and came up with the following information to the which emphasizes potential theft of digital finance.
Unfortunately, since blockchain transactions cannot be altered, the only way to get back stolen money is to make a fork that all users recognize as the authoritative blockchain. Insufficient security: Many blockchain hacks have happened on exchanges, which is where users can trade cryptocurrency.
Blockchain Hacking is Increasing. Recently, blockchain hacks have drastically increased as hackers have discovered that vulnerabilities do in fact exist. Since 2017, public data shows that hackers have stolen around $2 billion in blockchain cryptocurrency. This recent activity illustrates that blockchain is unfortunately not unhackable and users should still be cautious, especially when trading on exchanges. Looking forward, legal professionals who encounter blockchain should keep apprised on the risks and any new solutions.
Before using smart contracts or trading on an exchange, be sure to research whether there have been previous attacks and any relevant security measures. However, at this point it does not appear that blockchain users need to be too apprehensive because the technology is still very secure in design. Creators and administrators will undoubtedly continue to perfect security measures to decrease future hacking risks.
Certainly, it will take time to implement internationally, however, it is the right time to be discussing its implementation. Great input via Ericsson and the other cited reports.
Take care!
Prof. Carl Boniface