blockchain credit security

Is blockchain a solution for credit security?

Blockchain Credit Security

In the last 30 years, FICO scores were considered a reliable solution to measure creditworthiness and attach a risk score to each applicant. As the sub-prime mortgage crisis of 2008 proved it, this system was neither accurate or dependable, but it was the best option to date, and it continued to be used, despite numerous warning signs from the financial system.

Half of the US population has a credit score under 650, which makes them unqualifiable for a decent loan provided by a reputable financial institution, leaving them as fair game for predatory lenders. If you are unsure about your current situation, the first step is to document yourself thoroughly by accessing leading resources such as www.aaacreditguide.com. All that could change if the Fintech solutions were adopted as the new standard at the governmental level.

The Equifax breach

An important wakeup call was given by hackers who managed to steal over 143 million records containing sensitive personal information from Equifax. The credit bureau is one of the three institutions responsible for computing the risks for each account they hold and has been doing so without explicit consent from the population.

This unfortunate event should be the trigger of a significant paradigm shift. Until now, credit bureaus have capitalized on information by creating centralized repositories, maintained in a secretive way. The citizens could not verify their data unless they followed a long process and errors occurred frequently. Even more, in the case of a honeypot attack, which for this data architecture is only a matter of time, the losses and image prejudices are enormous.

The blockchain solution

The modern solution to this problem could be adapting the blockchain algorithm to create a decentralized, peer-to-peer network based on cryptographic protocols instead of clumsy paperwork. The first application of the blockchain technology, the Bitcoin has already become mainstream, proving the validity. Right now, the uses in finance, insurance and even oil and gas show its disruptive power.

Reputation & credibility

The underlying protocol of the blockchain removes the central authority in charge of maintaining the database with subscribers and the associated transactions. Instead, a publicly distributed ledger is created. At a designated interval, a new block with verified information is added at the end and sealed to the previous. The reputation of each participant can be verified by any other member, not just the central authority and traced back to their entry date.

This opens up new perspectives for companies to let go of the FICO score and take into consideration new ways of measuring risk and creditworthiness. Also, it makes it easier to gain and verify trust between peers. This could lead to the emergence of new lending actors, besides traditional credit companies.

Encryption

Through its construction, the blockchain technology allows verification without having data in plain text, but by running it through a computational algorithm. This brings a new level of security to transactions and ensures that even in the event of theft, the data would be useless to the perpetrators. If Equifax had this technology, all the credit scores could have been computed, but even if the information were made public, it would be useful without the client’s key and consent.

Owning your digital identity

The most important issue is not only related to our credit score but our sovereignty and identity. Currently, proof of our identity and all the following rights are not under our control, but that of a trusted central authority. If those files are compromised, there are few ways of getting back what is rightfully ours. The blockchain solves this problem by distributing the logs between network nodes, in such a manner that even if a part of the nodes is compromised, the information lives on and can be re-established quickly.

By Jess Holmes

CloudTweaks

Established in 2009, CloudTweaks is recognized as one of the leading authorities in cloud connected technology information, resources and thought leadership services.

Contact us for a list of our leading programs.

Why Open Source Technology is the Key to Any Collaboration Ecosystem

Why Open Source Technology is the Key to Any Collaboration Ecosystem

Open Source Collaboration Ecosystem Open source – software whose source code is public and can be modified or shared freely ...
Opportunities and Pitfalls When Hiring a Chief Data Officer

Opportunities and Pitfalls When Hiring a Chief Data Officer

The Chief Data Officer As part of their digital roadmap, organizations are increasingly taking advantage of big data and making ...
Tesla is Worth More Than Ford or GM. Is this the Automakers iPhone Moment?

Tesla is Worth More Than Ford or GM. Is this the Automakers iPhone Moment?

The Automakers iPhone Moment Remember Blackberry? How about Nokia or Motorola? Vaguely you say. Will we one day state the ...
Digital Identity Trends 2017 – Previewing The Year Ahead

Digital Identity Trends 2017 – Previewing The Year Ahead

Digital Identity Trends 2017 The lack of security of the Internet of Things captured public attention this year as massive ...
Built to Last: Choosing the Right Infrastructure Partner for Your Game

Built to Last: Choosing the Right Infrastructure Partner for Your Game

Choosing the Right Infrastructure Partner There are millions of gamers around the globe, and according to gaming market research firm ...
Blockchain info

How Can Blockchain-as-a-Service Help Your Business?

Blockchain-as-a-Service “Have you seen the price of Bitcoin?”, “You gotta get in on Ripple, it’s going through the roof!”, “Are we in ...
Closer Collaboration Between C-Suite and CISOs Needed to Bridge Gap in Cyber Readiness, Finds Accenture Report

Closer Collaboration Between C-Suite and CISOs Needed to Bridge Gap in Cyber Readiness, Finds Accenture Report

New Accenture survey finds fewer than one-third of CISOs and business leaders collaborate on a cybersecurity plan and budget NEW YORK; July 10, 2018 – With the proliferation of more and more sensitive data, expanding ...
'What the Hock?'; Broadcom shares sink on shock software deal

‘What the Hock?’; Broadcom shares sink on shock software deal

(Reuters) - Broadcom Inc’s (AVGO.O) surprise bid to buy software company CA Inc (CA.O) knocked $11 billion off the value of the chipmaker in trading before the bell on Wall Street on Thursday, with analysts ...
Coupa selected by Zurich Insurance to transform its business spend

Coupa selected by Zurich Insurance to transform its business spend

SAN MATEO, Calif., July 12, 2018 (GLOBE NEWSWIRE) -- Coupa Software (NASDAQ: COUP), a leader in business spend management (BSM), today announced that Switzerland’s largest insurer and global top 100 company, Zurich Insurance Group (Zurich), ...