Greenwich Says Majority of Major Banks Concerned About Blockchain Security

Greenwich.com – Stamford, CT USA – Transaction confidentiality is a major security concern for 63% of the experts and decision-makers at banks globally, according to a new report from Greenwich Associates.

The theft of some $72 million in bitcoins by hackers from Hong Kong-based exchange Bitfinex and other recent high-profile blockchain breaches illustrate the serious security questions facing the many companies working to bring blockchain technology to capital markets.

A new report, Securing the Blockchain, from Greenwich Associates is the next installment in a series of distributed ledger technology (DLT) focused research studies with 134 market participants working on blockchain technology globally. It delves into security concerns currently in debate within the industry, provides a detailed look at how blockchain security mechanisms work and the approaches of industry leaders working with this technology.

While transaction confidentiality tops the list of concerns, the security of private keys is also seen as a major issue by a majority of respondents. “Private keys can be thought of as secret codes or passwords that prove ownership of digital assets. The recent hacking of the Bitfinex exchange has been attributed to lax security of these private keys,” says Richard Johnson, Vice President of Market Structure and Technology at Greenwich Associates and author of the report.

Consensus Protocol

Securing the Blockchain details the competing consensus mechanisms – the algorithms that leverage cryptography to securely verify and record trades on the blockchain. While it is not necessary to understand the intricacies of differing approaches to consensus protocol, an awareness of their strengths and weaknesses is critical to their deployment for capital markets applications.

“Proof-of-work consensus, as used in the bitcoin blockchain, is generally viewed as inappropriate for financial services because of its high energy use, low throughput and slow verification times,” says Richard Johnson. “Although there remains uncertainty regarding the most appropriate consensus algorithm, our research concluded that the industry is currently leaning toward a method known as Practical Byzantine Fault Tolerance (PBFT).”

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