According to a recent report from Crypto Head, a platform that analyzes cryptocurrency markets, this year crypto is set to see a record number of cases of hacks and fraud. 32 cases have already been recorded this year, accounting for nearly $3 billion worth of funds taken. This number is on course to break the record of 38 set in 2020 which itself was a climb of 40.7% compared to 2009.
The increase is somewhat explained by the increase in overall market cap of crypto. As more projects and people enter the space, it follows that the number of cases of illicit activity should also rise. With that in mind, it is worth noting that the proportion of cryptocurrency used for illicit activities is, in fact, falling. According to a recent Chainalysis report, criminal activity represented just 2.1% of all cryptocurrency transaction volume in 2019. This is on the lower end of the UN estimate for traditional money used for illicit activity which is estimated to be between 2% and 5% of global GDP. The same Chainalysis report stated that in 2020 the criminal share of crypto transactions actually fell to just 0.34%, making it, at least by one metric, a more lawful medium of exchange than traditional money.
The framework recently laid out by the WEF signifies that crypo is becoming more and more mainstream. However, the presence of crime and especially hacks within the crypto sphere pose a significant problem. Highly publicized events such as the $600 million worth of crypto stolen from Poly Network can make crypto seem like an illegitimate space for many investors. It is vital that crypto shed this image if it is to attract more institutional investors, many of whom will only enter the space when they can be sure that all of the investments across their portfolio are secure.
Because of this, projects that deal with blockchain security are vital to maintaining crypto’s drive towards mainstream adoption. These are the projects that are going to provide many institutions with the confidence to enter the markets. Here’s a look at just three of these projects as examples of the kinds of services that they can provide and how they make crypto more transparent and secure.
Coinfirm is an AML (anti-money laundering) risk management platform for blockchain. It allows users to analyze other crypto projects for transaction patterns that could be indicative of money-laundering and other illicit activities. Usings risk checks and data points that relate to financial crime or counterparty identity, it provides its users with an in-depth understanding of a project’s transparency. Every transaction can be checked and reports provided for a full in-depth view of a project’s financial vulnerabilities. Users will be identified of behavioural changes that could indicate any financial irregularities.
For institutional investors who must be seen to operate in an ethical way, avoiding suspect crypto projects is important for their public reputation. AML platforms give them the tools they need to verify projects they work with and invest in. It allows them to prove, not just to themselves but to the general public, that they have not compromised their business ethics to enter the crypto market.
Anonymity has, for a very long time, been a key feature of crypto. Even though this aspect is attractive to many crypto users, it compromises a digital asset’s security as well as limiting the ways in which a digital asset can be used. TransitNet is giving crypto investors the option to voluntarily surrender their anonymity with an off-chain title registry for crypto assets. This will turn their digital assets from a bearer asset to a registered asset and provide many new financial use cases for their cryptocurrencies. For example, with legal proof of ownership an investor can use their crypto as collateral for non-digital loans. A title registry will also provide another layer of security, allowing investors to verify if funds have been stolen and ensure that any stolen funds are unusable at legitimate crypto exchanges.
Title registry is something that is likely to be hugely significant for institutions. Firstly, the ability for an institution to verify whose funds they are holding is vital in areas that require KYC. Perhaps more significant though, is the investment flexibility it provides. Having legal proof of ownership of a cryptocurrency opens the door to using it as collateral for off-chain financial instruments allowing an institution to utilize cryptocurrency in other areas of their investment portfolio.
The use cases of blockchain are many. As cryptocurrencies become more mainstream, blockchain can be used to secure digital assets in more and more varied ways. One such example is OriginStamp which provides the tools that a business needs to timestamp files, data, documents and more and store them on the blockchain. Doing this will prove the originality and time of existence of any digital asset and because blockchain technology is utilized for this product the timestamps are completely tamper proof.
Transferring large amounts of funds can be a process that often requires a lot of paperwork. A lot of this can be difficult to digitize because doing so makes it easier to counterfeit. Using blockchain to timestamp files digitizes the whole process while simultaneously being more secure than traditional contracts. This allows institutions to secure not just the blockchain transactions themselves but all of the legalities that surround said transactions.
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