Page 73 - FIGI: Security Aspects of Distributed Ledger Technologies

229 For public, permissionless (trustless) blockchains like Bitcoin where the use of nodes on the blockchain are publicly
used to verify transactions is a core feature, security of its blockchain – and not the vaults bitcoins are stored in - is
ensured by syntactic rules and computational barriers to mining. See also Greenspan (2016) ibid.
230 There is arguably also a trade-off in DLTs between security and transaction processing speeds. For a technical
discussion thereof, see Kiayias, A and Panagiotakos, G (2015) Speed-Security Tradeoffs in Blockchain Protocols,
available at https:// goo .gl/ bgsTR8.
231 The counterargument could be that a properly designed ‘permissioned’ network would be designed so that there is no
single-point of failure or central administrator who can unilaterally change the state. See Swanson (2015) ibid.
232 Nepal Innovation Hub, available at http:// bit .ly/ 2XXNdjB
233 Myler, J (2019) Sikka: The Blockchain-Based Application Putting Money in the Hands of Nepal’s Rural Communities by
Asia P3 Hub, available at https:// link .medium .com/ mVJhF6nqjW
234 Metcalfe's Law says that the value of a network is proportional to the number of connections in the network squared.
Shapiro, C and Varian, HR (1999) Information Rules. Similarly, the more people who have an identity on a DLT where
nodes can attest to the authenticity of the correct people being identified, the more entities will take the trouble to be
part of the acceptance network for that blockchain; that is, entities will join that blockchain to make use of the identity
functionality it provides.
235 Credit Suisse (2016) ibid; and Kaminska, I (2016) How I Learned to Stop Blockchain Obsessing and Love the Barry
Manilow, available at https:// goo .gl/ mv3Lcy.
236 BunnyPub (2019) Staking Is the New Mining — How People Make Money in Crypto These Days, available at http:// bit .ly/
2KvRaJm
237 Such as failure of a processor, memory or power supply. EEE defines high availability as, “…the availability of resources
in a computer system, in the wake of component failures in the system.” IEEE (2001) High-availability computer
systems, available at http:// bit .ly/ 2O3oniv; Netmagic (2001) Defining High availability and Disaster Recovery, available
at http:// bit .ly/ 2XRzbom
238 IEEE (2013) Infrastructure Resilience: Definition, Calculation, Application, available at http:// bit .ly/ 2XW7GoR
239 The Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks of the United States.
240 Risk for loss of funds where credentials are controlled by a single entity was demonstrated in the recent compromise of
the credentials used in the transfer of funds through the (non-DLT, for now) SWIFT network from the Federal Reserve
Bank of New York to the central bank of Bangladesh, Bangladesh Bank. See Reuters (2016) Exclusive: New York Fed
Asks Philippines to Recover Bangladesh Money, available at https:// goo .gl/ yqaJh7.
241 ibid
242 ibid
243 Pauw, C (2019) Insured Cryptocurrency Custody Services and Their Potential Impact: The Key to Institutional Investment
Growth?, available at bit .ly/ 31drreI
244 Avgouleas, E & Kiayias, A (2018) The Promise of Blockchain Technology for Global Securities and Derivatives Markets:
The New Financial Ecosystem and the 'Holy Grail' of Systemic Risk Containment (December 6, 2018). Edinburgh School
of Law Research Paper No. 2018/43, available at https:// ssrn .com/ abstract = 3297052
245 European Securities and Markets Authority (2019) Advice: Initial Coin Offerings and Crypto-Assets, available at https://
bit .ly/ 2CXSjFc

246 Cointelegraph (2019) Insured Cryptocurrency Custody Services and Their Potential Impact: The Key to Institutional
Investment Growth?, available at http:// bit .ly/ 2Mz9HqR
247 Larcheveque, E (2018) 2018: A Record-Breaking Year for Crypto Exchange Hacks, available at http:// bit .ly/ 2KrIOT0
248 Suberg, W (2018) Main Swiss Stock Exchange to Launch Distributed Ledger-Based ‘Digital Asset’ Exchange, available at
http:// bit .ly/ 2JEm4ye
249 Elias, D (2019) How Does Decentralized Finance Redefine Banking?, available at http:// bit .ly/ 2MxH795
250 Avgouleas, E & Kiayias, A (2018) The Promise of Blockchain Technology for Global Securities and Derivatives Markets:
The New Financial Ecosystem and the 'Holy Grail' of Systemic Risk Containment, available at http:// bit .ly/ 2SpdmXj
251 Here there is an important distinction between STOs and tokenized securities. The former is natively crypto, the latter
are simply crypto wrappers of a legacy asset.
252 There is no harmonized definition of safekeeping and record-keeping of ownership of securities at EU-level and the
rules also depend on whether the record-keeping applies at the issuer level (notary function) or investor level (custody/

Security Aspects of Distributed Ledger Technologies 71