Can blockchain technology provide banks with security against cyber attacks?

As Bitcoin gains widespread acceptance across countries, institutions and services, many companies are embracing its underlying technology — blockchain, a way to electronically verify transactions without a centralized ledger.

Unfortunately, over the past year, cybercriminals have turned their attention to companies and exchanges that use blockchain or cryptocurrency.

In June, cybercriminals attacked the DAO, which had raised more than $150 million, causing it to lose more than $50 million. Bitfinex, based in Hong Kong, was also targeted by cybercriminals, causing it to lose more than $65 million worth of Bitcoin in August. Earlier this year, the Bangladesh central bank's account at the Federal Reserve was also stolen by cyberthieves for about $81 million.

However, according to Coinbase co-founder Fred Ehrsam in a Financial Times article, blockchain security will increase over time.

He said:

"I think people are going to mess it up in the beginning. The fact is that when a new technology comes out, people need a period of getting used to it."

In addition, the Financial Stability Oversight Council pointed out that the flaws of new technologies are not obvious and will only become apparent when they develop to a certain scale.

Of course, without the experts to review new code to determine if there are flaws, it’s hard for companies to foresee what will happen in the future and take effective steps to prevent hacker attacks.

Ripple’s Chief Technology Officer Stefan Thomas said:

"There is no history to draw on for how to write secure code. Not surprisingly, this is a classic problem that is easily missed."

Cold Storage and Hot Wallets

Another issue is how digital currencies can be stored securely.

The general consensus is that cold storage is better than hot wallets because it is offline, making it difficult for hackers to access it.

Unlike Bitfinex, which moved its assets to cold wallets only after the hack, Coinbase has always stored 98% of its Bitcoin in cold wallets, and the remaining Bitcoins are insured.

Can blockchain help or hinder security codes?

There is disagreement when it comes to whether blockchain will help or hinder security.

Thomas believes the public networks being experimented with are better than today’s banking networks.

Arvind Krishna, senior vice president at IBM, agreed and said there is additional security when more eyes are watching the transactions that take place.

Because everyone has to agree to the transaction for it to go forward, it's much more secure than the way we trade today, and all you need to do is turn on a computer.

It may take some time, but hopefully advances in blockchain technology will provide a clear system so that people can easily see if money has been stolen, while also providing a basis for learning from past mistakes.