Explore the convergence of finance and technology, focusing on Frist Source Bank, a prominent financial services company headquartered in Indiana. Delve into the security concerns surrounding the First Source Bank and assess how blockchain technology offers a more secure alternative to traditional centralized banks.
Who Started First Source Bank?
First Source Corporation’s subsidiary, First Source Bank, is a financial institution with 81 branches in Indiana and Michigan. The First Bank of the United States was chartered by Congress in 1791, and the national banking system was created by the National Banking Acts of 1863 and 1864. A group of local businessmen organized the First National Bank of South Bend in 1863.
Is First Source Bank Safe?
According to data provided by the bank to the Attorney General of Maine, an attack on First Source Bank’s MOVEit Transfer server affected 450,000 individuals. The stolen data could be used for identity theft attacks, urging users to protect themselves against such threats. While the stolen information may vary for each victim, many of the affected 450,000 consumers could lose private personal data.
This incident has raised concerns about bank security. Particularly in the digital age, the risks of identity theft are increasingly prominent. Each victim may encounter different information exposures, making securing personal information an urgent task for users.
Blockchain Transactions or Centralized Banks?
The best understanding of blockchain is as a decentralized ledger. It can disperse trust, eliminating the need for intermediaries like banks and reducing costs. Blockchain technology can also create an entry into the ledger without being controlled by a central group but rather by a broader user base.
Every block within the blockchain signifies a connected transaction record linked to the chain. A distributed computing network verifies records and chronologically lists transaction blocks, forming the blockchain. It is important to note that blockchain has no intrinsic value, similar to printed currency and bank databases. The Bitcoin chain is one application of blockchain. From a technical perspective, blockchain, like other networks, is theoretically alterable. However, due to the distributed nature of nodes in the blockchain network, modifying records is nearly impossible, requiring control of over 51% of nodes and the swift alteration of all transaction records within a short time frame, which is as low as 10 seconds for Bitcoin. Till now, such modifications have not occurred.
Security and Privacy of Blockchain
While achieving real-time security and privacy in traditional information systems is challenging, blockchain can accomplish both. Blockchain can achieve confidentiality by establishing a “public key infrastructure” to resist malicious attacks while maintaining the scale of the ledger. The more extensive and decentralized the blockchain network, the stronger its security.
However, there are concerns in blockchain such as limited scalability, insufficient information confidentiality, and a lack of comprehensive industry standards. For example, even with enhanced privacy technologies like encryption and identity management, blockchain transactions can still be viewed across the entire network of nodes. In other words, metadata and data analysis can unveil information from encrypted data, enabling pattern recognition.
Scalability
Like Bitcoin and Hyperledger, Ethereum is another blockchain system. Ethereum’s co-founder, Vitalik Buterin, emphasizes the existence of the “trilemma of scalability.” In other words, only two can be achieved simultaneously among: decentralization, security, and scalability. In distributed ledger technology protocols, each node can store and process all transaction information, maintaining copies of the state of balances, contracts, and storage. While the entire operation of nodes ensures user privacy and security, scalability the challenge begins in scalability with a growing number of transactions. The required data storage capacity will also increase if developers increase block sizes to accommodate more transactions. Consequently, if each node maxes out, only a few big companies will have what it takes to run them, causing a clash between decentralization and scalability.
Privacy
Web3 players often say, “No private key, no cryptocurrency ownership.” After the FTX incident, exchanges are no longer the preferred means for users to manage assets. People have realized that crypto wallets are the best solution for managing digital currencies. The challenge arises in the high demands for managing private keys. Traditional crypto wallets often face risks such as private key theft, social engineering attacks, and phishing when interacting with the physical world. While cold wallets can mitigate security issues in the asset self-management process. Their complex usage makes them impractical for high-frequency scenarios.
The emergence of Multi-Party Computation (MPC) wallets perfectly solves the issue of self-custody. They ensure users have control over private keys while addressing private key management challenges like safekeeping, backup, and recovery. Additionally, MPC wallets enhance the security of asset self-management, freeing users from time and location constraints in managing and using assets. Moreover, due to adjustable signature schemes and the ability to change account addresses, MPC wallets can better meet enterprise-level users’ diverse and complex asset management needs. With these undeniable advantages, MPC wallet solutions are now frequently used by cryptocurrency funds, family offices, exchanges, custody service providers, and various DAOs. This solution is likely to see broader adoption among ordinary users soon.
At the intersection of finance and technology, the security incident at First Source Bank has sparked questions about the traditional banking system. Blockchain technology brings new considerations. Security, privacy, and scalability are challenges faced jointly by the financial and technology sectors.
About CipherBC
CipherBC stands as a market leader in digital asset custody and payment solutions, catering to businesses seeking a secure and efficient transition to Web3 transformation, ensuring the security of assets and We are committed to the mission of “ fostering financial freedom.” In line with this objective, we provide asset owners with a complete range of services, encompassing asset custody, merchant payments, clearing and other financial services.