Majority of financial services firms are concerned about the security of distributed ledger technology or blockchain, according to a new Greenwich Associates report.
Transaction confidentiality has been highlighted as the primary security concern by respondents in the report, ‘Securing the Blockchain’ that involves 134 market participants.
Security of private keys is another key concern highlighted by majority of the respondents.
Greenwich Associates vice president of market structure and technology and author of the report Richard Johnson said: “Private keys can be thought of as secret codes or passwords that prove ownership of digital assets. The recent hacking of the Bitfinex exchange has been attributed to lax security of these private keys.”
The recent theft of about $72m in bitcoins from Hong Kong’s Bitfinex as well as similar blockchain breaches in the recent times showcase the challenges faced by firms who are working to launch blockchain in capital markets, the report said.
“Proof-of-work consensus, as used in the Bitcoin blockchain, is generally viewed as inappropriate for financial services because of its high energy use, low throughput and slow verification times. Although there remains uncertainty regarding the most appropriate consensus algorithm, our research concluded that the industry is currently leaning toward a method known as Practical Byzantine Fault Tolerance (PBFT),” Johnson added.