Innovation Update

Future of fraud in a blockchain world



You can’t escape blockchain. The topic’s in the media daily. It’s at the forefront of digital disruption and innovation discussions among leading businesses. We’ve seen blockchain technology applications in banking, currencies, supply chain, contracts and dozens of other areas.

Maybe you totally comprehend blockchain. Or, possibly, you’re thoroughly confused.

Regardless, as anti-fraud, legal and compliance professionals, we must understand this technology and have a seat at the table when our organizations consider blockchain’s fraud risks. In fact, in EY’s recent Global Forensic Data Analytics Survey 2018, 32 percent of legal, compliance and anti-fraud professionals plan to adopt blockchain and distributed ledger technologies in 2018.

As this technology becomes more prevalent in business, anti-fraud professionals will need to ask: How can fraudsters exploit blockchain when we use it in business transactions, contracts, money exchanges or data interchanges?

In this column, I interview Paul Brody, a principal with EY and the global innovation leader of blockchain technology for the firm, to explore why and how this powerful encryption technology that brought us bitcoin and “smart contracts” could create new security risks and challenges, even as the technology closes off other avenues for theft and fraud.

 


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By John_Nugent
Good article. But there are fundamental issues with Blockchain. Blockchain uses hash functions in order to sustain reliability and validity. Hash functions use modulo 2 math functions. These hash functions yield a specific value for a specific set of data. In theory, change one bit in the data and one gets a different hash value. The two principal hash functions previously promulgated by NIST were SHA 1 and MD 5. But several years ago, several Chinese professors published a hack of the then primary hash functions whereby different sets of data could be made to yield the same hash value. So NIST moved to SHA 2. But how much better is SHA 2 than SHA 1? And remember, the Chinese are already using quantum computing technology for secure communications on at least one satellite. So in addition to Blockchain technologies facing significant challenges, so will many algorithms when quantum computing becomes more widely employed.