Some regulators dislike permissionless blockchains because bad actors might be participants, the regulators have no governance control and they can’t control money laundering. But they often overlook one of the biggest challenges beyond the blockchain itself – permissionless chains use the public internet which has security vulnerabilities. And those vulnerabilities could potentially be exploited to hijack parts of a blockchain network, undermining consensus. A recent paper from the Swiss National Bank (SNB) explores SCION, a network security architecture, which could be used to create a permissioned layer for cross border payments using DLT.
The SNB is familiar with the technology as it started using it in 2021 with SIX, the operator of the stock exchange and SIC payment system. Together they launched the Secure Swiss Finance Network (SSFN) with the purpose of ensuring resiliency.
The paper starts by exploring some of the weaknesses in the public internet, using the analogy of sending mail. When you post a letter, you have no idea what route it might take or whether a dodgy postman might steal it. So not only do you lack control over your letter’s route, but also over who comes into contact with your letter. SCION aims to address this by enabling a regulator such as a central bank to certify certain network participants and nodes, and providing some control and transparency over the routing.
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