Distributed ledger technology & cybersecurity : improving information security in the financial sector

Distributed ledger technology - commonly referred as Blockchain - has emerged as candidate for financial institutions to reform their businesses. The speed and cost of doing business using distributed ledger technology is expected to improve by simplifying back-office operations and lowering the need for human intervention. However, a number of security concerns around this new technology remains. Instead of depending on a central entity such as a single financial institution to track the validity of ownership of funds, a distributed ledger maintains all transactions and holdings and is updated by a number of counterparties. The distributed ledger allows counterparties to use smart contracts and enhanced transaction privacy. Updates to the Blockchain or "distributed ledger" leave an audit trail and allow auditing to verify how an agreement was executed. Blockchain protocols are believed to provide a transaction and application environment, by using a mix of consensus and transaction protocols to determine valid transactions, as well as reach agreement on the current state of items such as a contract or account balance. This paper aims to provide financial professionals in both business and technology roles with an assessment of the various benefits and challenges that their institutions may encounter when implementing a distributed ledger.