Security and Transparency Provided by Blockchain

1) Data Security in Blockchain

Blockchain stores data using DLT (Distributed Ledger Technology), offering significantly higher security compared to centralized databases.

Protection Against Data Tampering: Blockchain encrypts transaction data and stores it in blocks, making any modification impossible once recorded. This is a key factor in reducing the risks of financial fraud and cyberattacks.
Security in a Decentralized Network: Since blockchain distributes data across multiple nodes within the network, the entire system is not affected even if a single server is compromised. Traditional financial systems based on central servers are vulnerable to hacking. However, blockchain enhances security through various mechanisms such as PoS, PoH, etc. to prevent 51% attacks.

2) Transparent Transaction Records and Verifiability

Blockchain records all transaction histories on a Public Ledger, making them accessible for verification.

Transparent Transaction Records: Traditional financial systems manage transaction histories through central institutions, restricting external access to certain data. In contrast, blockchain records every transaction publicly, allowing both businesses and consumers to trust the data.
Facilitating Audits and Regulatory Compliance: Blockchain simplifies tax reporting and accounting for businesses. Unlike traditional financial systems that require separate accounting management, blockchain automatically records and verifies transactions, enhancing accounting efficiency.

3) Smart Contract-Based Automated Systems

A Smart Contract is a self-executing contract programmed with predefined conditions, further strengthening transaction security.

Fraud Prevention: Smart Contracts ensure that transactions are executed only when specified conditions are met, preventing fraudulent or unauthorized activities.
Automated Payment System: Blockchain-based Smart Contracts enable automatic payments when conditions are fulfilled. For instance, when a customer purchases a product, the payment is automatically processed only after confirming successful delivery.

4) Blockchain’s Anonymity and Personal Data Protection

Although blockchain makes transaction histories publicly accessible, user personal data remains protected. This addresses a significant concern present in traditional financial systems.

Protection Against Personal Data Breaches: Unlike traditional financial systems that store sensitive user information such as names, addresses, and account details on central servers, blockchain records transactions in an anonymized manner. This significantly reduces the risk of personal data breaches.
Integration with KYC/AML Systems: Blockchain can be integrated with existing financial regulations such as KYC/AML (Know Your Customer/Anti-Money Laundering). A system can be implemented where identity verification is required only under specific conditions, ensuring both privacy protection and regulatory compliance.

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Last updated 2 months ago

1) Data Security in Blockchain

Blockchain stores data using DLT (Distributed Ledger Technology), offering significantly higher security compared to centralized databases.

Protection Against Data Tampering: Blockchain encrypts transaction data and stores it in blocks, making any modification impossible once recorded. This is a key factor in reducing the risks of financial fraud and cyberattacks.

Security in a Decentralized Network: Since blockchain distributes data across multiple nodes within the network, the entire system is not affected even if a single server is compromised. Traditional financial systems based on central servers are vulnerable to hacking. However, blockchain enhances security through various mechanisms such as PoS, PoH, etc. to prevent 51% attacks.

2) Transparent Transaction Records and Verifiability

Blockchain records all transaction histories on a Public Ledger, making them accessible for verification.

Transparent Transaction Records: Traditional financial systems manage transaction histories through central institutions, restricting external access to certain data. In contrast, blockchain records every transaction publicly, allowing both businesses and consumers to trust the data.

Facilitating Audits and Regulatory Compliance: Blockchain simplifies tax reporting and accounting for businesses. Unlike traditional financial systems that require separate accounting management, blockchain automatically records and verifies transactions, enhancing accounting efficiency.

3) Smart Contract-Based Automated Systems

A Smart Contract is a self-executing contract programmed with predefined conditions, further strengthening transaction security.

Fraud Prevention: Smart Contracts ensure that transactions are executed only when specified conditions are met, preventing fraudulent or unauthorized activities.

Automated Payment System: Blockchain-based Smart Contracts enable automatic payments when conditions are fulfilled. For instance, when a customer purchases a product, the payment is automatically processed only after confirming successful delivery.

4) Blockchain’s Anonymity and Personal Data Protection

Although blockchain makes transaction histories publicly accessible, user personal data remains protected. This addresses a significant concern present in traditional financial systems.

Protection Against Personal Data Breaches: Unlike traditional financial systems that store sensitive user information such as names, addresses, and account details on central servers, blockchain records transactions in an anonymized manner. This significantly reduces the risk of personal data breaches.

Integration with KYC/AML Systems: Blockchain can be integrated with existing financial regulations such as KYC/AML (Know Your Customer/Anti-Money Laundering). A system can be implemented where identity verification is required only under specific conditions, ensuring both privacy protection and regulatory compliance.