How Blockchain Can Help In Preventing Cyber Frauds!

Ravinder Arora, Chief Information Security Officer, IRIS Software | Wednesday, 06 February 2019, 12:21 IST

How Blockchain Can Help In Preventing Cyber Frauds!There are a lot of layers in a secure payment process­ing environment. The more layers and participants, the more room  for error and disruption. Paper­work gets lost, records are hacked, files are deleted, and chargeback fraud happens.

What if these layers of account­ability were streamlined, remov­ing the need for human checks and balances? Decentralizing the way all transactions are stored, tracked, and approved could be the solution.

Enter blockchain banking. Could this be the solution to preventing internal and external fraud?

" With its single ledger system, blockchain banking can work to eliminate the layers of multiplicity and data transfer that happens within one single transaction " 

What is Blockchain?

Blockchains are distributed net­works that can have millions of us­ers all over the world. Every user can add information to the block­chain and all data in the block­chain is secured through cryptog­raphy. Every other member of the network is responsible for verify­ing that the data being added to the blockchain is real.

How do blockchains get formed?

A verified piece of data forms a block which then has to be added to the chain. To do this, blockchain users have to use their respective keys and power­ful computing systems to run al­gorithms that solve very complex mathematical problems. When a problem is solved, the block is add­ed to the chain and the data it con­tains exists on the network forever, meaning that it cannot be altered or removed.

What is Blockchain used for?

Blockchain is best known for being the technology behind cryptocurren­cies like Bitcoin and Ether (the cur­rency of Ethereum), but blockchain is much more than an instrument of finance. ... Blockchain serves as a bookkeeping platform or ledger that is incorruptible, enforces transpar­ency, and bypasses censorship.

What are Blockchain technologies?

The idea of decentralization. By de­sign, the blockchain is a decentral­ized technology. A global network of computers uses blockchain tech­nology to jointly manage the data­base that records Bitcoin transac­tions That is, Bitcoin is managed by its network, and not any one central authority.

How blockchain technology can help in preventing data theft and fraud prevention?

Identity theft cost consumers $16 billion dollars in 2016 alone. Al­though financial institutions alert consumers of potentially fraudulent transactions, this has never stopped criminals in the past.

Organizations soon demanded more information from the individ­ual to minimize identity theft, leav­ing individuals with no choice but to lose control over their personal information.

Blockchain can remove this prob­lem by creating a future where indi­viduals can retain their privacy with­out risking identity theft.

Blockchain is a decentralized shared ledger that is tamper-resistant and creates an environment where information can be viewed, shared, and stored safely. Being able to man­age information in such a secure setting helps to promote trust and transparency between businesses and consumers. This is especially critical when it comes to track and prevent fraud in such industries as supply chain, identity management, food safety, and finance.

With its single ledger system, blockchain banking can work to elim­inate the layers of multiplicity and data transfer that happens within one single transaction. The more layers, the more room for error; the more time delays, the more risk and vulner­ability. When done right, blockchain can eliminate these vulnerabilities.

Eliminate third-party approval. Blockchain relies on 51% approval of those involved in the transaction. Third-party approval is not required or permitted. Only those in the chain can access and approve.

Paper is replaced with digital data. Proof of purchase, approval records, receipt of items, and other payment data is stored in the block­chain. The merchant, issuer, acquir­er, and customer all have access to the same secure data-saving time and money in the event of a charge­back representment.

Error and complexity are thwart­ed. Fake data, errors in approval, double purchases, etc. are prevented within the linked blockchain pro­cess. Fraudulent data cannot be in­serted into the blockchain.

In spite of all it can do, block­chain is not a guarantee that fraud will never occur, but in instances where it does occur it is usually be­cause services have been layered on top of blockchain without being thoroughly tested. Also important to remember is the fact that block­chain networks are decentralized, while any infrastructure can have back doors which may be vulner­able to unauthorized access. There­fore, it’s essential that industries must use a blockchain that is spe­cifically designed for business which is paired with the correct services and infrastructure.

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