Almost everyone keeps money in a bank these days. Banks help keep our money safe, and bank cards make spending our money more convenient. With the world becoming increasingly online, we all want to make sure that our transactions remain secure, whether we are buying groceries online or gambling at an online casino. The question is then, how do banks keep your money safe?
What is double-spending?
Double spending is probably the number one worry of online shoppers. It is easy to replicate digital objects such as files or text. Any number of files can easily be copied to and from any location by simply clicking a button or pressing a few keys. Digital devices are very easy to use and simple, allowing for duplication like this to occur very easily. So how does this work in terms of banking transactions?
Duplication can be extremely problematic when dealing with money. A monetary system that allowed anyone to make duplicates of their money would be unwise. This is known as the Double Spend Problem. How can someone receiving digital money ensure that it was not sent to another person? How can members of a monetary network ensure that their money is not duplicated at will?
Banks will invariably do pre-authorizations as soon as a transaction is complete in order to temporarily remove the money and prevent double-spending.
Other banking security features
Banks have spent years making online transactions secure and now have a number of ways they make money secure. Features such as One Time Pins (OTPs), transaction authorization, identity confirmation, secure payment gateways, and many more have been developed to make online transacting safer. What about blockchain?
What is blockchain?
Blockchain is a method of recording information in a way that makes it difficult or impossible for anyone to alter, hack or cheat the system.
Blockchain is basically a digital ledger that records transactions. It is distributed throughout the entire network of computers on the blockchain. Every block in the chain holds a number of transactions. Each transaction added to the ledger of each participant is recorded every time it occurs. Distributed Ledger Technology is a distributed database that can be managed by multiple participants, meaning even if one database is destroyed, the system as a whole is not.
It would become immediately evident that a block in a chain had been altered. Hackers would need to modify every block of the chain across all versions to be able to corrupt the blockchain system. With the chain being stored and processed in multiple places, this task is impossible. With this incredible level of security, how will businesses and especially banks change with blockchain?
How will blockchain technology change businesses and especially banks?
Blockchain technology’s most basic and obvious use is as a payment system. Bitcoin and other cryptocurrencies can be used as digital money, or used to send money around the world. These transactions are instant and only require an internet connection. Although it can take several minutes for a transaction to be confirmed, it takes only seconds for the transaction to occur. These transactions are mainly anonymous, secure, and borderless. Transaction costs are also very low, only a few cents per transfer. This makes it much more affordable to send money around the world than through wire companies or through credit card processors. A merchant not wanting to pay the initial and ongoing fees in order to accept credit cards could take electronic payment via a cryptocurrency instead, and the costs they would pay would be a fraction of their usual costs.