I am an investor at Y Combinator, where I invest and partner with startups in B2B software, in cybersecurity and enterprise infrastructure.
While digital currencies have shown early promise in going mainstream, security and compliance challenges could hinder their long-term adoption. Given the anonymous nature of the blockchain network, digital currencies are especially appealing for illicit activity (such as darknet markets, terrorism and money laundering). For blockchain solutions to achieve their potential, regulators, fintech and financial institutions must address its flaws through better security standards and policies. According to WSJ, in 2021 alone, around $14 billion of digital asset transactions went to illicit entities. Not surprisingly, the European Union has called the digital currency market the “Wild West.”
Fundamentally, the architecture of the blockchain network was designed around anonymity. While the fiat system is built around user identity, the blockchain system is built on wallet identity, which is designed to be anonymous. For example, if you are sending or receiving digital assets (e.g., ethereum), you would send that ethereum to a wallet address. Unlike the fiat world, that wallet address does not have information attached that ties it back to a specific identity or person. There is no information attached such as Social Security number, name of the owner, country of residence. You don’t know if it belongs to an institution or individual or if it is on a sanctions list. Given the anonymous nature of wallet identities, digital currency is an appealing mechanism for criminals to evade law enforcement agencies.
Continue reading: https://www.forbes.com/sites/forbesfinancecouncil/2022/08/25/the-unique-cybersecurity-challenges-in-blockchain/?sh=ceb1c067d428
While digital currencies have shown early promise in going mainstream, security and compliance challenges could hinder their long-term adoption. Given the anonymous nature of the blockchain network, digital currencies are especially appealing for illicit activity (such as darknet markets, terrorism and money laundering). For blockchain solutions to achieve their potential, regulators, fintech and financial institutions must address its flaws through better security standards and policies. According to WSJ, in 2021 alone, around $14 billion of digital asset transactions went to illicit entities. Not surprisingly, the European Union has called the digital currency market the “Wild West.”
Fundamentally, the architecture of the blockchain network was designed around anonymity. While the fiat system is built around user identity, the blockchain system is built on wallet identity, which is designed to be anonymous. For example, if you are sending or receiving digital assets (e.g., ethereum), you would send that ethereum to a wallet address. Unlike the fiat world, that wallet address does not have information attached that ties it back to a specific identity or person. There is no information attached such as Social Security number, name of the owner, country of residence. You don’t know if it belongs to an institution or individual or if it is on a sanctions list. Given the anonymous nature of wallet identities, digital currency is an appealing mechanism for criminals to evade law enforcement agencies.
Continue reading: https://www.forbes.com/sites/forbesfinancecouncil/2022/08/25/the-unique-cybersecurity-challenges-in-blockchain/?sh=ceb1c067d428
