The potential of Blockchain in cybersecurity

Buoyed by digital transformation initiatives, businesses have doubled down on digitization and online services. But this rapid progress and digitization come at a price. Cyber threats to the financial services industry are growing in frequency and scope, aimed at exploiting weaknesses, disrupting systems, stealing data and funds. The frequency and sophistication of these attacks continue to rise since criminals use every loophole they can for malicious purposes. 

Who can forget Equifax? The credit-monitoring company suffered a severe setback when a breach exposed the private data of more than 160 million users. While Equifax spent hundreds of millions in settlements and damage control (the damages piled up to a whopping $700 million), Wall Street lowered the company’s valuation by $4 billion.

With the growth in cybercrime and security breach incidents, cybersecurity spend has risen exponentially in the past decade with no signs of abating. Gartner estimates that spending on information security and risk management will total $172 billion in 2022. Despite this staggering investment, the stakes keep getting higher. Business leaders today understand that the true cost of a breach goes far beyond the financial implications of an attack, often resulting in lawsuits, reputational loss, logistical headaches, and angry customers. To avoid these circumstances, cybersecurity teams are now assessing the role of technology such as blockchain to offer stronger transactional security and risk management measures. 

What is Blockchain?

A blockchain is a distributed network with millions of users across the world. Each user has access to the blockchain and all the data in the blockchain is secured with cryptography. All other members are responsible for verifying that the data added to the blockchain is accurate. In a nutshell, it is a digital, distributed, and decentralized public ledger that enables the process of recording transactions and tracking assets in a business network. 

Why is Blockchain security promising for cybersecurity and risk management?

The cybersecurity industry benefits from blockchain’s unique features that create a practically impenetrable wall between the hacker and the system. The inherently decentralized, cryptographic principles and consensuses-based nature of blockchain makes it impossible for data to be tampered with. It also provides high standards of data transparency and integrity. 

The three main tenets of blockchain security are:

1. Decentralization

Blockchain is not owned by any single individual. 

2. Transparency with pseudonymity

All blockchain transactions and corresponding values are visible to anyone who has access to the system. Each node or user on a blockchain has a unique alphanumeric address identifier. Transactions take place between blockchain addresses allowing complete transparency while protecting privacy.

3. Immutability 

Once a transaction is added to the database, the records cannot be tampered with because they are linked to every previous transaction record. 

When analyzed in the context of cybersecurity, these three laws make blockchain a potential solution for building secure and impenetrable systems. The most important argument for using blockchain in cybersecurity is that it eliminates the risk of a single point of failure.  

Blockchain use cases for cybersecurity

Blockchain’s promise as one of the most secure ways to carry out transactions in the digital world has made it an attractive proposition for many sectors, including financial services. Leveraging its integrity assurance, organizations can build cybersecurity solutions for many other applications and technologies. Here are some use cases of blockchain to boost cybersecurity:

1. End user security

Hackers are increasingly using edge devices like thermostats and routers to break into systems. With the rapid adoption of smart devices and home automation, it is quite easy for a cybercriminal to gain access through central administration or edge devices. 

Blockchain can help secure IoT systems and end user devices by decentralizing their administration. This means the device can make security decisions on its own without relying on a central admin or authority. These advantages are among the main reasons the technology is being widely used in financial institutions, such as banks. For example, end-user security is a particularly difficult issue in banks. Simple logins, centralized IT infrastructure and weak passwords frequently allow cyber attackers to enter network infrastructure. The usage of blockchains enables users and devices to be authenticated without passwords through multi-party verification via blockchain-based SSL certificates. The distributed and decentralized nature of the network that checks the integrity of transactions and account balances makes attacks virtually impossible.

2. DNS and DDoS attack mitigation

Distributed Denial of Service (DDoS) is when cybercriminals flood a network with so much malicious traffic that it cannot operate normally. These attacks slow down or shut down the website or resource systems completely. In case of Domain Name System (DNS) attacks, a bad actor will either compromise a network’s DNS or take advantage of its underlying attributes to carry out a wider attack. 

Blockchain technology could enable the establishment of peer-to-peer (P2P) and zero-trust networks, removing the requirement for devices to trust one another and eliminating the necessity for a centralized, single point of failure. Organizations can make a node under assault redundant and continue to operate as usual. As a result, even if a large portion of the blockchain network is attacked, the system will continue to function due to its distributed structure.

3. KYC verification 

Fraudulent e-KYC update is one of the most recent ways that scammers are deceiving naïve individuals. Posing as a service provider, fraudsters ask for sensitive information such as Aadhaar numbers and bank account details. This is a scenario that a blockchain-based KYC verification method can help avoid. 

Blockchain technology, as a decentralized ledger, would enable the collection and storage of data from various governments and private data portals into a single unchangeable, safe database. Cryptographic keys — a means for encoding data in machine-readable form – are used to protect each user's personal information on the ledger. Hackers and cybercriminals will have a difficult time breaking the keys and gaining access to necessary credentials.

What the future holds 

Given blockchain's various applications, such as facilitating transactions and storing data in a more secure manner, the financial services industry stands to benefit greatly from its growth. Emerging technologies such as permissioned blockchains can help achieve the important goals of combating cybersecurity risk and adequately protecting consumers' financial information and the integrity of the global financial system as cyber threats to the industry continue to evolve in complexity and intensity.

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