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Swift Is Hacked Again. The Bitcoin/Blockchain Fat Lady Sings.

Summary

With the second hack of Swift, the day of firewalls and permissioned systems are suddenly numbered.

This time it wasn’t hacked data -- it was the banks' money that was hacked.

Bank security is rapidly deteriorating.

It is time to adopt some kind of distributed ledger.

I see the bad moon arising. I see trouble on the way. I see earthquakes and lightnin'. I see bad times today.

-- Creedence Clearwater Revival

The SWIFT payment system failed again this week. The tone of Swift's announcement intimated the end of life on the planet earth as we know it. Swift's description of the system's attackers was apocalyptic, and did nothing to minimize the skills of the attackers, adding that the funds seized might be, of course, reinvested to give the hackers a kind of turboboost of evil. My sources tell me the culprit is Brainiac from the planet Zod.

Of course there is nothing funny about this situation, even if Swift's "chicken little" corporate reaction was pretty funny. The real lesson of this event is deadly earnest and, I believe, fully anticipated by most specialists in the security of our financial system. This event, though, was the Fat Lady's Song. The banks, exchanges, clearers like Swift, DDTC, and so on, are going to have to share something with the public that insiders already know.

The party is over for the old, permissioned, firewall based, electronic fortress, concept of trust-in-payments systems. And the alternative is very far from obvious.

The buzzwords, the sweethearts of the fintech movement, are systems known as distributed ledgers. Two words are about to become part of everyone's vocabulary: Bitcoin and blockchain. There are multitudes of manifestations of these two intimately related electronic phenomena. If you are new to the subject of Bitcoin and blockchain, the learning curve is steep.

The significance of the second Swift failure is this. Trust-based systems, such as those upon which the current payments systems operate, are becoming more expensive to protect at a rapidly increasing rate. The horse race between hackers and firewall builders is being won by hackers in spite of the rapidly increasing spending on internet security.

And these most recent hacks took banks' money, not customer money. That is a game changer.

Since God invented dirt, the banks have been soooo regretful about the lengthy delays and inefficiencies inherent in our transactions system. They're so sorry, they tell us, about the three days you wait between transactions and payments. And they really regret all those fees that you pay and inconveniences you experience with foreign exchange transactions.

What bunk. The banks, as a whole, make hundreds of billions a year on these inefficiencies.

The point of the article is this. Now that the bank's own money is being stolen, the financial world will be...


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