Is blockchain safe? HK IT insiders weigh in

Blackchain’s core technology may be safe, but it does not mean it does not have Blockchain, the distributed ledger technology (DLT) behind bitcoin, is now slowly but steadily being deployed for other applications and use cases.

In Hong Kong, a number of proof-of-concept (POC) projects and other blockchain initiatives have emerged in recent months. Blockchain is attractive for its ability to promote transparency and its promise of immutability that ensures data stored in “blocks” could not be tampered with. 

Blockchain in general uses well-established cryptography technology (i.e. digital signatures and encryption) as building block, hence its core technology is very secure,” said Alan Cheung, R&D director at Hong Kong Applied Science and Technology Research (ASTRI). “And there are different blockchain platforms which have different implementations.  Blockchain platforms with security audit should be relatively secured.”

Working with HKMA’s digital ID Workgroup, ASTRI has developed a Digital Identity Management POC system based on (DLT). The system improves operational efficiency by eliminating duplicated efforts and saving time while Know Your Customer (KYC) processes are being performed by banks.

Cheung noted that while the local banking sector is in the forefront of exploring blockchain projects to further their Fintech ambitions, ASTRI has been collaborating on projects that applied the technology in use cases other than Fintech.

“We have partnered with Bank of China (Hong Kong) to develop a property valuation blockchain system. The system was launched in last November and it provides a more secure and efficient way to digitize the process of property valuation,” Cheung said.

With blockchain deployments on the rise in Hong Kong, the time is ripe to ask about the security of blockchain technologies, given that security experts have been tirelessly saying over the years that no technology is absolutely safe.

Edmund Lowell, founder and CEO of KYC-Chain and the SelfKey Foundation, is a firm believer in the blockchain is completely secure.

Blockchain is safe because it is open to public scrutiny, if there is or was a hack available - it will be instantly exposed and fixed,” he said. There are no inherent risks to implementing blockchain, any more than there is to implementing another technology such as a closed loop PKI system.”

Inherent risks in the network architecture

While many industry insiders agree that the core technology underlying blockchain is secure, they do not rule out the fact that there are inherent risks in deploying the technology.

Several insiders have pointed out that a weakness in a company’s network infrastructure can jeopardize the security of a blockchain-based application.

“Blockchain, in essence, is a form of distributed database technologies which makes it no more or less riskier than other technologies. Since blockchain must run on a network connecting different parties, we may have to pay special attention to the design of the network architecture. CCB (Asia)’s bancassurance system is running on a private blockchain network which all connected parties are trusted which would also greatly strengthen the security of the system,” said Arthur Wong, general manager, head of information systems division, China Construction Bank (Asia). The bank has worked with IBM on a blockchain-based bancassurance system.