Digital financial transactions are growing in popularity every year. While more people turn to the internet for financial transactions though, they are opening themselves up to the possibility of fraud, as investor Dan Calugar explains.
Most companies that handle financial transactions on the internet rely on centralized servers or clouds provided by third parties. These companies will execute the payments and store customer data on their servers.
This creates lots of potential risks to parties involved in the transactions, though, simply because of the centralized nature of the networks.
An alternative to this is the Ethereum blockchain, the technology that fuels the cryptocurrency system for Ether. Here are three ways the Ethereum Blockchain creates safer internet transactions for people who shop, sell, receive wages and pay bills online.
Decentralization is the crux of any cryptocurrency and the blockchain technology that runs it. Instead of having one specific network host all the critical and sensitive data, the Ethereum Blockchain offers a decentralized architecture that allocates the information to multiple participants on the network.
This can be used for exchanging funds, of course, and for more complicated transactions such as buying and selling digital art and taking out loans.
The network also can run decentralized applications. The blockchain can host applications that people and companies create, giving users complete control over their data. And because no centralized entity manages it, use of the app is open on the Ethereum Blockchain.
2. No Intermediaries
One of the most powerful features of the Ethereum Blockchain is it eliminates the need for intermediaries. It allows users to connect to process financial transactions directly.
Of course, this can happen now without the blockchain. But intermediaries such as lawyers help review, interpret and write contracts.
The Ethereum Blockchain features intelligent contracts that are built directly into it. This ensures that both parties in a financial transaction adhere to the terms of the agreement, not releasing the funds until everything is completed.
Lawyers are no longer needed to review contracts. Banks are no longer required to process these financial transactions. Web hosting services are no longer needed to make it all happen.
By eliminating the intermediaries, you are removing another potential source of fraud, boosting the security of transactions in the process.
3. Secure Platform
You would think banks, financial institutions, and other companies that hold and process important data would have some of the most secure networks on the planet. But, major financial companies have experienced significant security breaches, putting millions of users' financial and personal information at risk.
Dan Calugar says on the surface, the same potential for security breaches exists with the Ethereum Blockchain. Yet, in the nearly six years it's been around, it's never been exploited by a hacker.
Sure, single, smart contracts have been hacked, but the entire network has proven safe and secure over the long haul. With more than $60 billion circulating on the platform, too, it would be a massive target for hackers.
The security of the platform in and of itself creates the possibility for safer internet transactions.
About Dan Calugar
Dan Calugar is a versatile and experienced investor with a computer science, business, and law background. He developed a passion for investing while working as a pension lawyer and leveraged his technical capabilities to write computer programs that helped him identify more profitable investment strategies. When Dan Calugar is not working, he enjoys working out and being with friends and family, and volunteering with Angel Flight.