In the short period that blockchain has been around, the distributed ledger technology has spread from cybercurrency to a wide number of applications in the financial industry. Cost savings, faster transactions, and improved data security are just a few of blockchain’s redeeming qualities.
Today, many top technologists, investors and bankers are appreciating blockchain technology’s ability to transform the way people and businesses transmit value and establish trust. In fact, there isn’t a business or organization these days that doesn’t have highly sensitive information that requires robust security measures. Lucky for us, behind each blockchain is enhanced cryptography used to protect the data from hacker fraud.
From the beginning…
As I mentioned, blockchain was initially used as the underlying mechanism for cybercurrency. If you are familiar with Bitcoin, you probably know that it is an anonymous payment system that uses cryptography to secure the transaction, and the blockchain is the technology it employs.
One of our partners, Gem, is an innovator in the bitcoin ecosystem and empowers bitcoin companies to build secure products while eliminating the hard parts of blockchain development. Gem offers developers the simplest way to get up and running, giving them security by default by implementing Thales HSM as the root of trust for bitcoin transactions and wallets. Blockchain technology addresses the visibility of an asset life cycle and streamlines operational costs by connecting the ecosystem to universal infrastructure. Shared infrastructure allows companies like Gem to create global standards without compromising privacy and security.
Major benefits for financial industry
Fast forward a few years and blockchain has become a game changer in the financial services industry, with the potential to enhance security, speed and operational efficiency. The shared ledger offers the financial industry a new model for transactions that is more efficient and secure than legacy systems.
For example, a company named LedgerX uses blockchain as a basis for commodity trading of bitcoins. By utilizing HSMs as their root of trust, they ensure that they secure the cryptographic operations of the system. LedgerX is an institutional trading and clearing platform that is awaiting full regulatory approval from the U.S. Commodity Futures Trading Commission (CFTC) to trade and clear options on bitcoin. Once approved, LedgerX will be the first federally regulated bitcoin options exchange and clearing house to list and clear fully collateralized, physically settled bitcoin options for the institutional market. This would be a huge leap for bitcoin and no doubt change industry perceptions.
Expanding the usage of (private) blockchain
Now, we know it is important for organizations to build, deploy, and operate blockchain networks with a strong root of trust. But, how can organizations expand the usage of blockchain and private blockchain so a number of entities can participate and exchange a type of value? This is where our new partner Chain comes in.
Today, Thales announced its integration of its market-leading nShield hardware security module (HSM) with Chain. Chain is a provider of enterprise-grade blockchain infrastructure that enables organizations – including Nasdaq, Citi and Visa – to build breakthrough financial products and services.
Underpinning each blockchain is robust cryptography used to protect the data from fraud perpetrated by hackers. In fact, the security of a blockchain depends upon the security of its cryptographic keys, and every transaction executed through a blockchain process requires a new set of one-time keys. Chain uses the Thales nShield HSM to generate and secure the critical keys.
Where is blockchain going?
There is no doubt that blockchain is slowly but surely becoming mainstream. Now organizations such as Accenture are simplifying blockchain technology integration within the industrial-grade security systems that support financial services, healthcare, government and other sectors. Integrated with Thales HSM, Accenture’s solution creates a developer-friendly interface between emerging blockchain platforms and widely used hardware security technology.
For blockchain technology to work, we need to believe and trust it. What Gem, LedgerX, Chain and Accenture all have in common is making sure there is a strong route of trust with in the blockchain by deploying Thales HSM. With the right security in place, blockchain is a technology that has extraordinary potential to change settlement and transactions in financial services and other industries, and I look forward to watching its continued success.