By EWN • 17 January 2022 • 12:15
You change your passwords every month, regularly check your credit score, and make sure you only visit reputable business and financial sites. What could go wrong with your financial data and assets? Everything.
Financial institutions spend on average 10% of their IT budget on cybersecurity, or about $2300 per employee annually. If you do the math, that amounts to millions of dollars for a corporation to fend off various threats from all sides.
In one corner are cyber criminals who know that financial websites are the most vulnerable to hacking. The contents of a webpage can be altered and apps can be cloned, so what you see is not, in fact, what you get. Malicious codes on websites or apps can access users’ cookers and steal their personal information, to be used however and wherever the criminals choose. Financial institutions employ safeguards like two-factor authentication and data encryption, but hackers are ingenious, and always seem to develop new ways to steal customers’ identification and financial assets.
Then there are the ransomware attacks that threaten whole financial systems. Not only could your personal and business accounts be locked, but denial-of-service attacks can cripple system-wide operations for days. Up to a third of companies pay the ransom, and any attack results in significant costs to the institution whether they pay or not. The loss of revenue affects customers as well as the institutions, with damage to reputation, staff resignation and layoffs, and closures.
Finding the talent to combat these threats isn’t easy, but outsourcing to any third party vendor only increases the risks of vulnerability. Add to this chaos the chance for internal fraud and human error. Fully 75% of attacks are done intentionally by employees, with a quarter attributed to human mistakes like opening a suspicious email.
It’s all enough to make you store your assets in a mattress, but does that make them safe? Who can you really trust? Maybe a system that doesn’t need it.
Cryptocurrency and decentralized finance are called trustless because the blockchain technology they use doesn’t require trust in a third party, like another human or institution. There is no intermediary between you and your financial assets or transactions, and no single entity that has authority over the financial system you use. All transactional data is stored on peer-to-peer networks, and the operations are performed by immutable or unmodifiable code. This means that while institutions and their people can be corrupted, this computer code cannot.
Assets are held in crypto wallets that contain private keys. Passwords, even if random and containing letters and symbols, can eventually be discovered by “brute force” attacks, particularly if they are stored or used repeatedly. Private keys, on the other hand, have 51 alphanumeric characters that are virtually impossible to hack, plus many other complex security safeguards.
Transactions are executed by “smart contracts” that rely on decentralized code and verification, meaning that they have no centralized point of failure and are virtually impossible to shut down. Furthermore, blockchain is immutable and irreversible, eliminating the possibility of unintentional or malicious modification.
You’ll note that using crypto and DeFi (Decentralized Finance) does require you to trust something: computer code. If there are bugs in that code, it will be vulnerable to hacking and bad actors. That’s why Nimbus, a leader in the DeFi industry, has a 3-layer audit system that emcompasses audits by top independent firms, internal audits and an ongoing bug bounty program with rewards for hackers.
Needless to say, there are always bad actors in any industry, and DeFi has seen a few as it evolves and becomes established. For instance, crypto “rug pulls” are when unscrupulous developers abandon their projects and leave with all the users’ assets. The best way to mitigate this threat is to research the background of your platform’s leaders. You want someone like Alex Lemberg, Nimbus CEO. With over 30 years of experience working as a business analyst for Merrill Lynch, Morgan Stanley, Barclays Capital, CIBC, Bank of America Securities, and Credit Suisse, he’s here to stay. His vast understanding of business technologies and knowledgeable, innovative team create a streamlined, user-friendly environment on the Platform.
On the bottom line, the choice between traditional financial institutions and DeFi comes down to one thing: trust in yourself. If you want to control and protect your own assets, can take a little time to learn what DeFi offers, and find a Platform like Nimbus that provides a DeFi hub and easy access, then that choice is clear.
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