Basically, institutions lose 5% of their asset yearly due to scams and frauds. The scams and frauds remain incognito for a period of time until the authorities be able to recognize them. But, blockchain could be a game changer here. In fact, it has unique features, which make it be immune against these kinds of attacks. Here we are going to introduce you 3 features of blockchain which creates secure network to store data. Let’s see how does blockchain prevent fraud?
Blockchain is distributed
As we talked about in our previous article, Blockchain is a public distributed ledger, which contains data and information of all transactions clearly. All the data in the network distributes among nodes around the world, and because of this feature, Blockchain is decentralized. It means that there is no authority or entity to control it.
Along with distributed feature, Blockchain network is transparent. it means that all the participants in the network can have access to the data stored on the blockchain. As we mentioned above, usually fraud or scam activities remain unknown for a period. But, blockchain provides the transparency. It means any manipulation or fraud activity is recognizable quickly.
Furthermore, if anybody wants to make any changes to data stored on the network, it requires to get confirmation from all of the participants in the network. As a result, it’s almost impossible to make any changes or do manipulation. Usually, the scams and frauds are implemented by changing or removing the data and information of a company’s accounting system, or running malicious software on the network. But, blockchain is immune to these attacks.
Blockchain is immutable
As we mentioned before, we cannot make any changes or manipulate the data stored on blockchain. As a result, there is no possibility to remove a transaction from the network as well. Once a block is created and added to the chain of the blocks, all nodes and participants should agree that the transaction is eligible. Once they all agreed, there is no chance to reverse the transaction or remove it.
Each block contains the information such as date and time, amount of transaction, etc. Each block is connected to its previous and next block. As a result, you can easily track a transaction. You can track that where does this asset comes from? Who own it? etc.
Blockchain has the ability to create license
Companies and businesses deal with a lot of confidential data. They do not give permission to anybody in order to have access to this information and data. As a result, they require to have a network, which is immune and do not give permission to others, who are out of the network to have access to their sensitive data. In addition, the participants of the network also could not be able to make any changes or manipulate the data.
It means, they require licensing. However, not all of the blockchain networks have the feature to issue license, but also there are some kinds of private blockchains, which provide licensing. In those blockchains, the participants should be invited to the network and be eligible to have access to the data.
How Does Blockchain Prevent Fraud?; A network for identity management
One of the main criteria in a licensed network is controlling the accessibility and identity management. In this case, the users will get verified by using cryptographic identity cards using hyper-ledger fabric. This ID cards make them be able to observe the transactions.
However, even the eligible users would not be able to add anything to the blockchain or make any changes. Because, all the data are encrypted. As a result, there is no chance to hide records and traces in general. So, the scammers have less chance to remain unknown.
How Does Blockchain Prevent Fraud?; Conclusion
As we explained above, blockchain could be a suitable solution in order to fight against malicious attacks, scams, and frauds. In fact, it helps companies and businesses in order to stay immune from such those attacks. If you are willing to become more familiar with blockchain and its other features, check out our other articles about blockchain in cryptopedia category.