We are always looking for better alternatives to improve our lives. And just like you would want to ensure your physical security, you also want to be sure you are financially safe.
Blockchain’s makeup holds such a great promise to ensure users can transact in a safe and secure environment. It’s actually one of the reasons why the world is seriously pursuing this technology.
Looking at the statistics, MarketsandMarkets places the global blockchain market at USD 20.1 billion and expects it to reach highs of 248.9 billion in the next few years.
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So, if you want to know how this technology is changing things in the finance sector, you have just arrived in the right place.
We will look at how blockchain is affecting financial security and provide other important insights.
Does Your Financial Security Matter?
Before we go to the depths of this discussion, let us first explore some statistical information that shows why you need to ensure financial security.
Are you actually aware that about 20% of all reported cyber-attacks in the past two decades were directed at the financial sector? In 2023 alone, the number of attacks amounted to about 3348, up from 1829 in 2022.
A considerable number of experts believe that blockchain can really help to minimize the impact of such attacks.
It is no wonder that the bestcryptowallet platforms are innovatively taking advantage of this technology to ensure you can transact seamlessly and securely.
Packetlabs has released a report highlighting the financial sector as the second-most attacked industry based on data breaches in the past three years.
The organization went on to demonstrate that ransomware attacks in the sector had increased from 55% in 2022 to 64% in the following year.
And surprisingly, only about 14% of finance companies claim they are able to prevent threat actors before they can access their data.
Given that recovering from an attack is becoming extremely expensive, the need to be safe is even more apparent.
Professionals actually anticipate the global cyber-attack costs to increase by 15% year-over-year for the next few years. With all this information, let us now see how blockchain can help.
The Decentralized Nature Of Blockchain
For a very long time now, we have been keeping and managing data centrally. The risk with this is that once the entity is attacked, we risk losing the entire data.
It is, however, not the same thing with blockchain. The technology distributes information across multiple computers so that in case one entity is attacked, many others can continue running.
Something else is that data cannot be altered unless there is consensus. This encourages transparency, as any changes must first be approved by the participants across the whole network.
And what better way to minimize unauthorized alterations than blockchain’s immutability?
The Place Of Smart Contracts
In the past, we needed manual intervention and third parties to enforce contracts. But with smart contracts, the process is more efficient as the contracts are self-executing.
Third parties are no longer needed. And in the fintech sector, where speed, security and cost-efficiency are needed, such innovations are quite transformative.
That could be part of the reason why the global smart contracts market has already hit $1.71 billion and could grow by a CAGR of 24.7% in the next few years.
Several banks, for example, are already using smart contracts to streamline their processes.
Recent reports indicate that Bank of America, among many others, is testing smart contracts to streamline the recording of ownership change and payment procedures.
You may have also seen some companies using smart contracts to automate the whole process from letter of credit issuance to funds release in international trade.
The good side to this is that there will be minimal errors. And remember, we said that blockchain is immutable.
So, it means once the contract has been recorded, it can’t be altered except by consensus from all the relevant parties. And you, of course, know what this means – transparency and trust.
Does Blockchain Have Any Challenges?
Of course, while blockchain technology is safer than a majority of the conventional systems available today, it does not come without hurdles as well.
For example, some specialists claim that this particular network is prone to the 51% attack more than any other form of attack.
A 51% attack is one in which the attackers gain access to over 50% of the hashing power of a network with the intent to disrupt the consensus protocol in place.
Therefore, as much as you may wish to improve your financial security using blockchain, these are issues you cannot afford to brush aside.
In fact, the World Economic Forum recently noted about 500 cybersecurity attacks targeting crypto alone.
For sustainability-conscious individuals, blockchain seems controversial. It needs huge amounts of energy to mine and validate transactions.
In fact, in some regions like China, many people are divided regarding the technology’s future because of such concerns.
It is just magical to see how blockchain continues to make waves in the financial sector.
Who would have ever imagined that we could automate contracts and decentralize information storage? But we are now seeing all these possibilities, thanks to blockchain.
Basic principles, though, apart from these advantages, are a few challenges that need to be tackled.
It appears that blockchain systems require a lot of electricity and usage might not be suitable for a world that is becoming more and more frugal in energy resources.
Hence, it also means that one may have to still keep waiting to see the future of e-finance with respect to this technology.
