How to Avoid Another Bank Hack with Distributed Financial Technology


Ripple’s multi-sign capability can help banks avoid future financial attacks.

In February, hackers succeeded in stealing $81 million from a Bangladesh Bank account at the Federal Reserve Bank of New York. Similar cyber attacks have also occurred in Vietnam, Ecuador, and most recently, Ukraine. These bank heists have painfully highlighted the vulnerabilities in cross-border transaction banking, and particularly in the SWIFT network which issued these payments.

It is rumored that the Bangladesh attack involved at least one insider who helped the hackers navigate the bank’s computer system using malware. This heist points to the ever-increasing opportunity for distributed financial technology to improve interbank settlement over the status quo.  These new technologies modernize infrastructure for global settlements and introduce new features that could help banks avoid similar hacks in the future.

One such feature that we just launched on the Ripple Consensus Ledger (RCL) is multi-signing. The multi-sign feature increases the security of the RCL by allowing account holders to require signatures by more than one stakeholder to authorize their transactions. It provides collective control over the account, so that no single party can nefariously authorize or block transactions.

With multi-sign, the user can require signatures from other users, devices, or institutions, so a malicious actor must compromise multiple machines to send transactions on the user’s behalf.

Multi-signing already exists to some extent in traditional banking, but the difference with distributed financial technology is that the rules are enforced by the RCL. This creates a better safety net so that even if banks’ internal controls break down, they’re more likely to catch fraudulent transactions.

Ripple will also offer a similar multi-sign capability in its solution for banks that implement the Interledger Protocol (ILP). This functionality, enabled by what’s known as crypto-conditions, allows banks to require customers’ cryptographic signatures on transactions so individual bank employees can’t transfer customer funds on their own.

The bank heists in Bangladesh and around the world have demonstrated that the weaknesses that exist today at the periphery of payment networks are partly due to outdated single signature methods.  The new features found in distributed fintech solutions, such as multi-signing, are not available in traditional systems like SWIFT’s. Blockchain technology delivers a more robust and distributed security architecture for banks.

To learn more about what else to look for in a distributed financial technology, check out this Blockchain Checklist.