The importance of cybersecurity: security risks and solutions in the financial digital sphere
Over the last couple of years,cyber attacks have become one of the biggest threats, not only to business but to society at large. Cyber criminals and hackers are now capable of deploying malicious code to bring down everything from hi-tech companies to critical infrastructure in an instant. As markets grow more global and complex, we rely more and more on technology and so are new threats in the shape of cyber intrusion, manipulation, misuse and other cyber misconduct.
Entities such as the SEC and ESMA are always looking to provide new security guidance to for investors, broker-dealers, investment companies, exchanges and other market participants to protect their customers from cyber threats. The SEC in specific, keeps a watchful eye over market participants by making cyber security a priority of its National Exam Program.
Cyber Security in blockchain
While blockchain technology is radically revolutionizing how values are exchanged, economical evolution driven by innovations in computer science is taking place at an unprecedented pace. The maturation of this technology, however, may come at the cost of innumerable failures and potential losses; The main point in this scenario is how to guarantee the issuance of fully compliant Digital Securities as well as the token distribution afterwards and to safeguard the entire platform from cyber-attackers. Tokens (e.g. Ethereum based utility ERC20 tokens) are produced on the blockchain, which, unlike Bitcoin, is based on smart contracts utilization, making contracts more volatile and risky in some cases, if proper handling is not done throughout the process be open to hacks, misuse or even hijacking.
Weaknesses in Security Tokens
The security model currently in place at banks and old school financial institutions follow the “fortress mentality”. Nowadays however, banks needs to start adopting more effective measures to maintain greater control over staff members. We understand computers and the global net can be used as weapons, and the effort to improve computer security is driven by contradictory forces, as the Internet needs to remain open, with much of its totally unsecured and decentralized architecture exposed to fraud and malware.
There are some disadvantages which will invariably come along when security tokens are discussed. Removal of a 3rd party entity usually leads to the shifting of responsibilities onto the buyer or the seller in the transaction. These middlemen (broker/dealers, financial institutions, token issuers) serve a lot of important functions in the ecosystem including issuance, underwriting, preparation of marketing strategies, investor interest, cyber security overview and compliance regulation. Many critics feel that the entities above won’t be able to successfully execute these functions without traditional financial institutions backing them up. On the other end, each year cybercriminals become more sophisticated and able to program bots and tools to try and hack these contracts, allowing a shift of tokens/value. Another drawback encountered in security tokens is secondary trading market errors and security flaws. Most platforms today has a vast net of security models making sure no breaches occur and maintaining the high level of trust for their users, but as seen in some cases, hackers are evolving and finding new ways to take advantage of loopholes that tech teams or security sentinels might have missed out.
Providing an extra layer of Security
The traditional financial world relays on technological barriers which have not changed in a while. The way banks let users access them using passwords, without using digital identification, and secure email in addition to securing their web servers, creates an opening for potential fraud and malware; Digital identities are among the strongest methods that can be used to authenticate our e-identities, yet some financial institutions are still not considering the risk of inadequate authentication mechanisms.
In the world of digital securities, all the regulations can be coded into a smart contract and become immutable. Doing so allows an encapsulation of the regulations on the blockchain that cannot be changed, not even by sophisticated hacking tools. In other words, smart contracts are code-binding and guarantee that the contracts will always bear out without a 3rd party enforcer. Stellerro enhances the logic, quality and security of smart contracts and performs tests on blockchain assets, liabilities, equity and smart contracts, thus establishing a firm foundation for accelerating
companies’ adaptation of blockchain technology. The financial and legal audit process of Stellerro is carried out in three tiers: Compliance, Security, and Efficiency. Validating the integrity of the codes run on blockchain. Using its state-of-the-art cyber security tools and expertise, Stellerro investigates the smart contract code to detect potential breaches, known hacker attacks, potential fraud, and bad practices that may cause security threats.
Stellerro was created to assist asset owners, funds, entrepreneurs & startups in taking part in an alternative method of fund raising. Stellerro believes that as the blockchain ecosystem matures, digital offerings will become easier to access and invest in and their security token offering is the first step in doing so. FInd out more at www.stellerro.com or contact the team for any inquiry at: info@stellerro.com.
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