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amansharmaminiproject-221130084931-58b8b7dd
amansharmaminiproject-221130084931-58b8b7dd
amansharmaminiproject-221130084931-58b8b7dd
ON
BLOCK
CHAIN ON
FINANCIAL
SERVICES
ROLL NO.
2107140700005
THANK YOU
AMAN SHARMA
TABLE OF CONTENT
1 Preface
2 Introduction
3 Current state of cyber security
4 Problem Identification
5 Global Network Vulnerable
6 Policy Maker’s
7 Approaches for Addressing the cyber security resource
gab
8 Traditional financial system vs. Decentralized
financial system
9 Common Block chain application in finance
10 Blockchain technology challenging vulnerabilities
11 Blockchain Benefits
12 Recommended Solution
13 Reason to buy blockchain in financial sector
14 SWOT Analysis
15 Technology Implementation
16 Digitization of financial Instrument
17 Conclusion
18 Bibliography
PREFACE
We may be at the dawn of a new revolution. This revolution
started with a new fringe economy on the Internet, an alternative
currency called Bitcoin that was issued and backed not by a
central authority, but by automated consensus among networked
users. Its true uniqueness, however, lay in the fact that it did not
require the users to trust each other. Through algorithmic self-
policing, any malicious attempt to defraud the system would be
rejected. In a precise and technical definition, Bitcoin is digital
cash that is transacted via the Internet in a decentralized trustless
system using a public ledger called the blockchain. It is a new
form of money that combines BitTorrent peer-to-peer file sharing
with public key cryptography. Since its launch in 2009, Bitcoin
has spawned a group of imitators—alternative currencies using
the same general approach but with different optimizations and
tweaks. More important, blockchain technology could become
the seamless embedded economic layer the Web has never had,
serving as the technological underlay for payments, decentralized
exchange, token earning and spending, digital asset invocation
and transfer, and smart contract issuance and execution.
1. INTRODUCTION :
Digital financial services (DFS) hold great promise as a means to
enable financial inclusion and thus help improve people’s lives.
However, cybercrime has become a key concern in developing
and emerging countries’ financial markets and is threatening to
hinder global advances in building more inclusive financial
sectors. Over recent years, financial markets in Sub-Saharan
Africa, the East Asia and Pacific region, Latin America and South
Asia have been affected by a rapid increase in the number of cyber
incidents and data breaches – and particularly affected are those
markets with higher volumes of DFS transactions. While markets
in Asia are recording the highest use rates of mobile banking and
digital payment applications, they are also experiencing the
highest volume of cyberattacks on financial institutions. In 2016,
financial institutions in Bangladesh, Indonesia, Japan, the
Philippines, Taiwan and Viet Nam were targeted in a series of
attacks. In Sub-Saharan Africa and Latin America, cybercrime is
also on the rise, with cyber-criminal communities in these two
regions growing faster than anywhere else. One explanation for
these trends may be the fact that DFS transactions are often
carried out using insecure devices and over transmission lines that
were not designed to protect the security of financial transactions,
which leaves DFS systems and providers more vulnerable.
Furthermore, with developed economies building up their
defences against cyberattacks, cyber criminals seem to be shifting
their attention to easier targets in emerging DFS markets and
exploiting their vulnerabilities.
While cyber defences and good online practices are being adopted
in developed countries and by large multinational FSPs, medium-
sized and smaller FSPs, and particularly those operating in
developing countries, remain underprepared. A review of over
700 organisations from across Africa found that the banking
sector lost USD 1.05 trillion as a result of cyberattacks in 2017.
The review reported that 75% of organisations were not
employing security testing techniques, 60% of organisations were
not keeping up to date with cyber security trends and attacks, and
75% of the vulnerabilities identified within organisations
involved missing patches and software package updates. Indeed,
the review states that “Africa’s savings and credit cooperative
organizations, financial cooperatives and microfinance
institutions are the most vulnerable due to weak system
safeguards and protections”
Another study highlights the increase in attacks on mobile
banking systems. In Africa, cybercrime in mobile transactions in
2017 cost the sector USD 140 million, which includes losses from
SIM swaps, social-engineering and insider fraud. The
vulnerabilities are present on both the provider’s and the user’s
side. Mobile money users frequently fall victim to social
engineering attacks due to insufficient awareness and higher
levels of credulity. Also, many mobile money applications lack
basic security controls such as data encryption, making it easy for
criminals to intercept transactions or eavesdrop . CGAP identified
that a consumer’s financial information can be intercepted at
many stages of a mobile money transaction, meaning there are at
least five possible types of attack: (i) eavesdropping by external
hackers; (ii) eavesdropping via fake network base stations; (iii)
exploitation of roaming technology; (iv) insider eavesdropping;
and (v) other threats from malefactors operating inside MNOs and
DFS providers. Other DFS systems have vulnerabilities too.
Point-of-sale (POS) devices, for example, which enable digital
payment and other types of transactions, have been compromised
by malware. Due to the decentralised nature of POS systems,
which are located in manifold individual retail outlets, attacks are
hard to detect and remedy. In developing countries in particular,
POS devices and systems are found to be insufficiently well
monitored and protected.
COMMUNICATION
Existing communication protocols in security networks are highly
centralized. While this naively makes the controls easier to
physically secure, external actors require fewer resources to
disrupt the system. We present a solution to this problem using a
proof-of-work-based blockchain implementation built on
Multichain. We construct a test bed network containing two types
of data input: visual images and microwave sensor information.
These data types are ubiquitous in perimeter intrusion detection
security systems and allow a realistic representation of a real-
world network architecture. The cameras in this system use an
object detection algorithm to find important targets in the scene.
The raw data from the camera and the outputs from the detection
algorithm are then placed in a transaction on the distributed
ledger. Similarly, microwave data is used to detect relevant events
and are placed in a transaction.
VALIDATION
A Blockchain Validator is someone who is responsible for
verifying transactions within a blockchain. In the Bitcoin
Blockchain, any participant can be a blockchain validator by
running a full-node. However, the primary incentive to run a full
node is that it increases security. Unfortunately, since this is an
intangible incentive, it is not enough to prompt someone to run a
full node. As such, Blockchain Validators comprise primarily of
miners and mining pools that run full nodes. It’s important to note
that “validation” and “consensus” aren’t the same thing. A
Blockchain Validator performs validation by verifying that
transactions are legal (not malicious, double spends etc).
However, Consensus involves determining the ordering of
events in the blockchain – and coming to agreement on that order.
VERIFICATION
Blockchains are made of blocks of code joined together and is
essentially a process based on consensus between transacting
parties. The blockchain network has many nodes of such
continuous blockchains. It functions as a ledger which is
decentralized. Whenever a new block is introduced, the
transaction gets a digital signature fingerprint which cannot be
altered and consists of hashtag functions of the previous block
with an output that is unique. If the output is changed and not
verified the transaction becomes invalid and unverified. This
means that all network nodes should receive the exact same
output on executing the hash. If the change is acceptable by this
test, the transaction is verified.
Blockchains provide security, immutable records, and
verification as the prime features. The different blocks are held
together by connecting hashtags, and each and every block holds
the hash code of the preceding block got from the values
generated when the new block is introduced.
Self-sovereignty:-
Self-sovereignty implies that you are in total control of all things
related to you and that you do not rely on anyone else for anything
that you may need. Self-sovereignty in financial terms means you
are in full control of your money, what happens with your money,
how you invest it or just hold it and no one else can have access
to your money without your explicit permission. Today this is
extremely easy to achieve if you hold your "money" in
cryptocurrencies, digital assets, stablecoins or even tokenized
securities. No need for a bank. You carry it on you or put it in a
safe place for when you need it. It’s your call. It’s your privilege
and responsibility.
Immutable transparency:-
Well today there are a myriad of options to invest your
cryptocurrencies and stable-coins in decentralized platforms that
let you earn an interest on your holdings, or borrow against, or put
it up for creating pooled funds that are further used to provide
liquidity to other financial functions such as mortgages or
financial products, or participate in decentralized "defi"
derivatives, etc.
Thus, the more decentralized the Blockchain is, the more nodes
and computing power there are, which mechanically reduces the
possibility of attack to 51% and at the same time increases the
security of the Blockchain.
To demonstrate the great advantage of decentralization over
centralization in terms of security, let us start with the study of a
centralized database: when a large group of data is stored on a
central server, a hacker who accesses to the server can collect a
large number of data at a time. This would have disastrous
consequences, both for consumers who would see their
confidential data revealed to everyone, and for the company who
control this server in terms of image.
51%. The risk of piracy is close to zero, which at the same time
Unfeasible to Attack
Talking about blockchain it is unfeasibly hard to hack or attack.
Blockchain is decentralized, encrypted, and cross-checked
which m h
allows the data to ain strongly backed. As ain is fully
re blockc
loaded with nodes and to hack most of the nodes co ncurrently
it is impossible.
Being one of distributed ledger technologyit’s most
fundamental attributes are data immutable. It offers a whole new
level of succeeding security where any action or transaction
cannot be altered or counterfeit. This technology valid every
transaction to get the confirmation by multiple nodes on the
networ k.
The finance industry has been facing many challenges for a very
long time. The incredible advancements in technology have led to
solving numerous problems, but some new technologies have
created new issues in the process. There are multiple fintech
solutions available today, making it very confusing for financial
service providers to decide which solution will suit
them best. Hence, they look for an all-in-one solution that can
help solve all of the major challenges being faced.
Blockchain in financial services is highly promising and can solve
significant challenges faced by the industry.
Financial services all across the globe are still centralized and
multi-layered. Financial data is mostly stored in centralized
databases, and it has to go through multiple intermediaries
such as the front office, back office, etc. There is a severe lack
of transparency in the system, with the safety of the data being
solely dependent on the intermediaries and database security.
Even if the databases have maximum protection, there are still
very high chances of data breaches and servers’ hacking. The
lack of transparency in the system fosters security threats as
nobody can know what is happening until things go wrong or
data gets breached. Though understandably, everyone does not
want their financial records to be transparent, having a certain
degree of transparency in the system is beneficial and essential
for both financial service providers and their clients.
Reduced Costs
Money transfers:-
Transferring money to other countries presents many problems
and challenges for consumers and financial institutions. People
send billions of dollars internationally each year, and the process
is usually expensive, laborious, and error prone.
Blockchain can change all that. Many major banks have adopted
international payments with blockchain technology, which saves
time and money. Consumers can also use blockchain money
transfers to complete electronic transfers with mobile devices,
avoiding the cumbersome process of visiting a money transfer
facility, standing in line, and paying fees for a transaction.
Financial inclusion:-
Blockchain’s low costs give startups a chance to compete with
major banks, promoting financial inclusion. Many people are
looking for an alternative to banks because of restrictions like
minimum balance requirements, low access, and banking fees.
Blockchain can provide an alternative that uses digital
identification and mobile devices, free from the hassle of
traditional banking.
Reduced fraud:-
Blockchain stores information in a ledger with transaction
information within each block, along with a unique hash that
refers to the previous block. Every person within the network
receives a copy of the transactions as well. Because of these
features, blockchain technology is resistant to distributed denial-
of-service attacks, hackers, and other types of fraud.
Without the threat of cyber attacks, the expense of conducting
business is reduced, helping all parties involved save money and
stress.
Crypto currency:-
Digital currencies are the new wave of assets that rely on
blockchain. Though digital currency is already in use, blockchain
companies are lowering the barrier of entry and providing a
seamless exchange of the most popular cryptocurrencies as a
banking alternative.
n of Financial Instru
financial instruments – compri
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holdings. These digitized instr