Fighting cybercrime using blockchain
Unlike many centralized systems in the financial industry, blockchain technology is decentralized, with multiple copies of the decentralized ledger, all of which must match.
Cybercrime, including identity theft and theft of financial information, is rampant and costs the unsuspecting public billions of dollars each year. Although centralized data storage with huge amounts of customer data, often referred to as “Honey Pot”, has been attacked by hackers to steal millions of individual financial and personal information, there is also a growing trend of stealing personal information individually with a trick. called “Social Engineering”.
Unlike most centralized systems where secrecy prevails, blockchain relies on a distributed database that can be used as an open and transparent ledger for any activity. It has a single database, with identical copies stored on many different computers. If someone tries to change part of the database, they must change every instance of the database simultaneously, making it virtually impossible for hackers to tamper with or change information on the blockchain.
The immutable nature of distributed databases in a blockchain system that only allows the addition of records, without the ability to delete or edit records, makes it superior to centralized databases.
The way blockchain technology stores information is that the ledger stores each transaction as a block that cannot be edited or changed after it has been publicly reported. A collection of clients known as miners validates each block in the chain before proceeding to the next one. Hacking becomes exceptionally challenging as a result of this unbreakable chain of information. If you want to make changes to any subsequent blocks, miners must re-verify them, which requires writing new blocks.
Since the blockchain adds records through a consensus mechanism, you would only be able to hack this system if you could convince 51% of the miners in real time that your changes were true and legitimate. Even then, your changes would only last until someone else with sufficient computing power disagreed with them and wanted to replace them, thus starting their chain. To put it another way, this kind of hacking is unlikely to happen because it would require billions of dollars worth of computing power just for a single small blockchain network, including just the cost of the many powerful mining computers.
The holy grail of cybercrime is stealing and using personal identity. In response, managing identities via the blockchain is a potent tool that has the potential to be used to combat cybercrime. Identity management can benefit from using the blockchain. Identity management involves identifying individuals so that you are aware of who you are interacting with online and preventing fraud by determining whether a person is who they say they are and preventing them from falsely claiming ownership of another person’s identity or assets . We need a method to identify criminals based on their online activities, so this is crucial to the fight against cybercrime.
The transparency of the blockchain makes it difficult for cybercriminals to hide their tracks because anyone with access can see the content. By preventing unauthorized individuals from editing the contents of each block or inserting themselves in the middle of a chain of transactions, the encryption, hashing, and other security features built into each block will also help protect against certain types of attacks.
Another issue that is often ignored when talking about cybercrime and identity theft is the lack of personal identity documents for as many as a quarter of individuals globally.
Massive efforts have been made to secure the identity of those with a legal identity, but nearly 2 billion individuals, most from poor countries, still need identity protection. If a government or financial system seeks to ensure that a person is who they say they are, they must ensure that everyone has an identity.
Blockchain can also be very instrumental on this front. With the ability to codify a person’s identifying features, including their DNA, it can be very cost-effective to provide identity to every individual globally.
Cybercrime prevention is an urgent priority for financial institutions, especially with the growth in the volume of personal data of individuals we are already experiencing, and we will do so to a greater extent in the near future.
Blockchain technology, used in conjunction with artificial intelligence, presents enormous potential to revolutionize how financial and personal identity data is stored and shared, and this is a solution to financially overcome the threat of cybercrime. This mix of technologies may still need to be fully developed and there needs to be significant buy-in from financial institutions before widespread adoption, but there has been significant interest in this area.
It is important to note that more than technology alone will be needed to effectively combat cybercrime alone. It will require significant human experience and expertise to observe systems and detect suspicious activity dynamically. But having the right approach in place to manage financial and personal data in the safest possible way and give experts the tools to operate at their most efficient is critical to beating back the challenge of cybercrime. This is where blockchain can be part of a long-term solution.
The views above are the author’s own.
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