Reimagining the future of digital payments with blockchain

These are just a few of the many cases that highlight the potential to lose funds. However, it’s not just money at stake, personal information is equally susceptible to such attacks. In 2019, 1.3 million debit card users’ personal details were exposed online. The RBI did direct the banks to investigate but what was done - was done. Yet, unfortunately, it still prevails. Symantec, a cybersecurity company, reported that India was among the top three countries in the world for phishing and malware attacks.

The real problem, however, is not in the platforms, but with the architecture. Traditional payments portals are built on centralised infrastructures and this simply makes them more susceptible to these malicious attacks. Why? Because in a centralised network, one ‘hub’ runs and controls everything, as well as holds all the data. This means it is easier to identify and target that ‘hub’ to disrupt the whole system. In contrast, due to their distributed nature, blockchain-based, decentralised payment architecture can potentially counter such attacks by being a far more difficult and therefore less attractive target.

Payment infrastructures built on blockchains are essentially:

- democratic,

- securer,

- tamper-proof, and

- transparent.

This means a decentralised architecture-based payment portal is virtually hack-proof, way safer than payments platforms built on traditional, centralised infrastructures.

Let me explain with an example.

The 2018 malware hack of the Cosmos Bank’s servers saw Rs 90 crore siphoned off to thieves. The failure to detect this malicious activity was caused by a lack of efficient security and transparency in the system. Perhaps this could have been prevented if blockchain technology was in use. Blockchain technology is capable of maintaining transparency, thanks to its distributed ledgers, which enable early detection as transaction data is shared between all the participating users in a given network.

Moreover, blockchain-based infrastructures are far more resistant to the kinds of attacks that centralised structures are exposed to, by the sheer beauty of the design. Data on a blockchain is marked with cryptographic signatures that can be cross-verified by the users (nodes). If there are attempts to change the data, then the signature is rendered invalid. Blockchain also uses ‘consensus protocols’ among its users, allowing them to validate and record transaction data. This process of verification and validation makes a transaction immutable and tamper-proof.

Additionally, with multiple nodes attempting to reach a consensus for a transaction, it becomes much easier to resist malicious attacks by circumventing any single-point-of-failure. In simpler words, it’s safer, because it’s democratic.

Another important aspect of blockchain technology is protecting user data with digital identities. Most cryptocurrency and blockchain-based user platforms investigate and verify user identities via KYC/AML verifications with government-sanctioned identification, such as a driver's licence. This helps prevent potential fraudulent activities like terrorist funding, tax offences, money laundering, etc. Needless to say, user data is better protected on a blockchain; they can be used to create digital identities, and to verify and secure them with the help of cryptography and its ‘zero-knowledge proofs’.

Thus, as compared to traditional models, it is much easier for a blockchain-based payment system to maintain not only data security but also user-privacy. The industry is already starting to see a steadily growing adoption, with 47 million+ consumers using blockchain wallets, as per a report by Statista. With the growing number of data thefts and hacks, stakeholders in this space are trying to learn from the past while seeking new solutions. Thanks to novel blockchain protocols and intuitive decentralised applications, a more efficient synergy between technology and businesses can be created, which in turn, will help devise sustainable infrastructure to provide top-notch data security and privacy to users everywhere.