Can blockchain really eliminate payment fraud?
As the problem of payment fraud intensifies, the world of finance is increasingly looking to emerging blockchain payment processing systems for a solution.
Numerous big firms are testing blockchain-inspired systems that promise to make digital transactions more secure and efficient, while a handful, such as Visa and HSBC, have launched their own commercial platforms.
It’s an interesting turn of events given that virtual currencies such as bitcoin, “mined” using blockchain networks, or at least the public exchanges on which they are traded, have been subject to a large degree of fraud.
But banks and payments firms are less interested in digital coins than they are in the technology that underpins them, which they believe could be harnessed in a host of different ways.
At its most basic, a blockchain is a shared and secure digital ledger that allows each component, or block, within a transaction to be tracked and approved by everyone who is party to the transaction.
Proponents say it creates an irrefutable digital paper trail that is more transparent and cuts out room for manipulation. This could facilitate more secure transactional records for the transfer of almost any kind of asset, from cash and shares to property and insurance contracts.
“Blockchains help create public sources of truth, which means they reflect the one and only set of global transactions that are mathematically verified and secured. To that end, it becomes harder to cheat the system at the level of the actual data,” says Lex Sokolin, fintech expert at ConsenSys, a developer of solutions based on ethereum blockchain technology.
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