Author Topic: 2017 Investment Management Outlook  (Read 57 times)

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2017 Investment Management Outlook
« on: August 10, 2017, 07:28:57 am »

Several major trends will likely impact the investment management industry in the coming year. These include shifts in buyer behavior as the Millennial generation becomes a greater force in the investing marketplace; increased regulation from the Securities and Exchange Commission (SEC); and the transformative effect that blockchain, robotic process automation, and other
emerging technologies will have on the industry.

Economic outlook: Is a major stimulus package in the offing?

President-elect Donald Trump may have to depend heavily on private-sector funding to proceed with his $1 trillion infrastructure spending program, considering Congress ongoing reluctance to increase spending. The US economy may be nearing full employment with the younger cohorts entering the labor market as more Baby Boomers retire. In addition, the prospects for a fiscal stimulus seem greater now than they were before the 2016 presidential election.

Steady improvement and stability is the most likely scenario for 2017. Although weak foreign demand may continue to weigh on growth, domestic demand should be strong enough to provide employment for workers returning to the labor force, as the unemployment rate is expected to remain at approximately 5 percent. GDP annual growth is likely to hit a maximum of 2.5 percent. In the medium term, low productivity growth will likely put a ceiling on the economy, and by 2019, US GDP growth may be below 2 percent, despite the fact that the labor market might be at full employment. Inflation is expected to remain subdued. Interest rates are likely to rise in 2017, but should remain at historically low levels throughout the year. If the forecast holds, asset allocation shifts among cash, commodities, and fixed income may begin by the end of 2017.

Investment industry outlook: Building upon last year’s performance
Mutual funds and exchange-traded funds (ETFs) have experienced positive growth. Worldwide regulated funds grew at 9.1 percent CAGR versus 8.6 percent by US mutual funds and ETFs. Non-US investments grew at a slightly faster pace due to global demand. Both worldwide and US investments seem to show declining demand in 2016 as returns remained low.

Hedge fund assets have experienced steady growth over the past five years, even through performance swings.

Private equity investments continued a track record of strong asset appreciation. Private equity has continued to attract investment even with current high valuations. Fundraising increased incrementally over the past five years as investors increased allocations in the sector.

Shifts in investor buying behavior: Here come the Millennials
Both institutional and retail customers are expected to continue to drive change in the investment management industry. The two customer segments are voicing concerns about fee sensitivity and transparency. Firms that enhance the customer experience and position advice, insight, and expertise as components of value should have a strong chance to set themselves apart from their competitors.

Leading firms may get out in front of these issues in 2017 by developing efficient data structures to facilitate accounting and reporting and by making client engagement a key priority. On the retail front, the SEC is acting on retail investors’ behalf with reporting modernization rule changes for mutual funds. This focus on engagement, transparency, and relationship over product sales are integral to creating a strong brand as a fiduciary, and they may prove to differentiate some firms in 2017.

Growth in index funds and other passive investments should continue as customers react to market volatility. Investors favor the passive approach in all environments, as shown by net flows. They are using passive investments alongside active investments, rather than replacing the latter with the former. Managers will likely continue to add index share classes and index-tracking ETFs in 2017, even if profitability is challenged. In addition, the Department of Labor’s new fiduciary rule is expected to promote passive investments as firms alter their product offerings for retirement accounts.

Members of the Millennial generation—which comprises individuals born between 1980 and 2000—often approach investing differently due to their open use of social media and interactions with people and institutions. This market segment faces different challenges than earlier generations, which influences their use of financial services.

Millennials may be less prosperous than their parents and may need to own less in order to fully fund retirement. Many start their careers burdened by student debt. They may have a negative memory of recent stock market volatility, distrust financial institutions, favor socially conscious investments, and rely on recommendations from their friends when seeking financial advice.

Investment managers likely need to consider several steps when targeting Millennials. These include revisiting product lines, offering socially conscious “impact investments,” assigning Millennial advisers to client service teams, and employing digital and mobile channels to reach and serve this market segment.

Regulatory developments: Seeking greater transparency, incentive alignment, and risk control
Even with a change in leadership in the White House and at the SEC, outgoing Chair Mary Jo White’s major initiatives are expected to endure in 2017 as they seek to enhance transparency, incentive alignment, and risk control, all of which build confidence in the markets. These changes include the following:

Reporting modernization. Passed in October 2016, this new requirement of forms, rules, and amendments for information disclosure and standardization will require development by registered investment companies (RICs). Advisers will need technology solutions that can capture data that may not currently exist from multiple sources; perform high-frequency calculations; and file requisite forms with the SEC.

Liquidity risk management (LRM). Passed in October 2016, this rule requires the establishment of LRM programs by open-end funds (except money market) and ETFs to reduce the risk of inability to meet redemption requirements without dilution of the interests of remaining shareholders.

Swing pricing. Also passed in October 2016, this regulation provides an option for open-end funds (except money market and ETFs) to adjust net asset values to pass the costs stemming from purchase and redemption activity to shareholders.

Use of derivatives. Proposed in December 2015, this requires RICs and business development companies to limit the use of derivatives and put risk management measures in place.

Business continuity and transition plans. Proposed in June 2016, this measure requires registered investment advisers to implement written business continuity and transition plans to address operational risk arising from disruptions.

The Dodd-Frank Act, Section 956. Reproposed in May 2016, this rule prohibits compensation structures that encourage individuals to take inappropriate risks that may result in either excessive compensation or material loss.

The DOL’s Conflict-of-Interest Rule. In 2017, firms must comply with this major expansion of the “investment advice fiduciary” definition under the Employee Retirement Income Security Act of 1974. There are two phases to compliance:

Phase one requires compliance with investment advice standards by April 10, 2017. Distribution firms and advisers must adhere to the impartial conduct standards, provide a notice to retirement investors that acknowledge their fiduciary status, and describes their material conflicts of interest. Firms must also designate a person responsible for addressing material conflicts of interest monitoring advisers' adherence to the impartial conduct standards.

Phase two requires compliance with exemption requirements by January 1, 2018. Distribution firms must be in full compliance with exemptions, including contracts, disclosures, policies and procedures, and documentation showing compliance.

Investment managers may need to create new, customized share classes driven by distributor requirements; drop distribution of certain share classes post-rule implementation, and offer more fee reductions for mutual funds.

Financial advisers may need to take another look at fee-based models, if they are not using already them; evolve their viewpoint on share classes; consider moving to zero-revenue share lineups; and contemplate higher use of ETFs, including active ETFs with a low-cost structure and 22(b) exemption (which enables broker-dealers to set commission levels on their own).

Retirement plan advisers may need to look for low-cost share classes (R1-R6) to be included in plan options and potentially new low-cost structures.

Key technologies: Transforming the enterprise

Investment management poised to become even more driven by advances in technology in 2017, as digital innovations play a greater role than ever before.

Blockchain. A secure and effective technology for tracking transactions, blockchain should move closer to commercial implementation in 2017. Already, many blockchain-based use cases and prototypes can be found across the investment management landscape. With testing and regulatory approvals, it might take one to two years before commercial rollout becomes more widespread.

Big data, artificial intelligence, and machine learning. Leading asset management firms are combining big data analytics along with artificial intelligence (AI) and machine learning to achieve two objectives: (1) provide insights and analysis for investment selection to generate alpha, and (2) improve cost effectiveness by leveraging expensive human analyst resources with scalable technology. Expect this trend to gain momentum in 2017.

Robo-advisers. Fiduciary standards and regulations should drive the adoption of robo-advisers, online investment management services that provide automated, portfolio management advice. Improvements in computing power are making robo-advisers more viable for both retail and institutional investors. In addition, some cutting-edge robo-adviser firms could emerge with AI-supported investment decision and asset allocation algorithms in 2017.

Robotic process automation. Look for more investment management firms to employ sophisticated robotic process automation (RPA) tools to streamline both front- and back-office functions in 2017. RPA can automate critical tasks that require manual intervention, are performed frequently, and consume a signifcant amount of time, such as client onboarding and regulatory compliance.


Change, development, and opportunity
The outlook for the investment management industry in 2017 is one of change, development, and opportunity. Investment management firms that execute plans that help them anticipate demographic shifts, improve efficiency and decision making with technology, and keep pace with regulatory changes will likely find themselves ahead of the competition.


Download 2017 Investment management industry outlook

Source: Deloitte.com

 

Blockchain-based banking backend Vault OS from ex-Googler emerges from stealth mode

 vaultos featureDespite holding the vast majority of the world’s wealth (or perhaps because of that), banks aren’t exactly hotbeds of cutting-edge tech, often relying on decades-old systems for everyday tasks. ThoughtMachine, a company led by ex-Google engineer Paul Taylor, is looking to change that with a modern, fully integrated, blockchain-based banking operating system called Vault OS.

The bombastic press release announcing the system’s emergence from two years of stealth development makes a lot of promises: the company “has solved the greatest challenge in fintech;” Vault OS is “100% future-proof,” “hugely flexible,” and “fixes broken banking forever.”

Whether Vault OS is able to live up to its own hype is a question that will have to wait (legacy banking systems aren’t replaced overnight) — but it’s hard to deny that the problem is real and the solution, or at least what the company reveals of it, is compelling.

 

ThoughtMachine’s Paul Taylor

The main job of Vault OS is to perform the core function of a bank: essentially, maintaining a huge ledger. That’s something that a blockchain is uniquely suited to doing, of course, a fact that clearly did not escape Taylor, whose previous work led to the speech recognition software used by Google today.

Each instance of the OS will run its own private blockchain and cryptographic ledger, hosted as a service by ThoughtMachine. Of course, whether banks will be willing to essentially permanently outsource their most fundamental operations is yet another big question.
The benefits may be worth it: blockchains are secure, scalable, and versatile, and could conceivably replace legacy systems that limit or delay ordinary operations. Transactions would occur in real time, and are safely and centrally stored, allowing for deep data dives by both bankers and consumers. There’s even an API.

Naturally there are a ton of questions that must be answered, and assurances made, and regulations complied with, before any bank will touch this with a ten-foot pole. I’ve contacted ThoughtMachine with several — will they release code or a whitepaper for inspection? How is data migration handled? What’s the timescale for rollout? — and will update this post if they get back to me.

Source: Techcrunch

Digitale technologieën leveren Europees bedrijfsleven komende twee jaar 545 miljard euro op

 925609982sEuropese bedrijven kunnen dankzij het toepassen van digitale tools en technologieën een omzetstijging van 545 miljard euro behalen in de komende twee jaar. Voor Nederlandse bedrijven ligt dit bedrag op 23,5 miljard euro. Dat blijkt uit een onderzoek van Cognizant in samenwerking met Roubini Global Economics onder ruim 800 Europese bedrijven.
 
Het onderzoek The Work Ahead – Europe’s Digital Imperative maakt onderdeel uit van een wereldwijd onderzoek waarin het veranderende karakter van werk in het digitale tijdperk wordt onderzocht. De resultaten tonen aan dat organisaties die het meest proactief zijn in het dichter bij elkaar brengen van de fysieke en virtuele wereld, de grootste kans hebben om meer omzet te behalen.
 
Omzetpotentieel benutten
Leidinggevenden geven aan dat technologieën als Artificial Intelligence (AI), Big Data en blockchain een bron kunnen zijn voor nieuwe businessmodellen en inkomststromen, veranderende klantrelaties en lagere kosten. Sterker nog, de ondervraagden verwachten dat digitale technologieën een positief effect van 8,4 procent zullen hebben op de omzet tussen nu en 2018.
 
Digitalisering kan voor zowel kostenefficiëntie als omzetstijging zorgen. Door bijvoorbeeld intelligent process automation (IPA) toe te passen – waarbij software-robots routinetaken overnemen – kunnen bedrijven kosten besparen in de middle en backoffice. Uit de analyse blijkt dat de impact van digitale transformatie op omzet en kostenbesparing in de onderzochte industrieën (retail, financiële diensten, verzekeringen1, maakindustrie en life sciences) uitkomt op 876 miljoen euro in 2018.
 
Nog steeds achterblijvers op digitaal gebied
Europese executives verwachten dat een digitale economie gestimuleerd zal worden door een combinatie van data, algoritmes, software-robots en connected devices. Gevraagd naar welke technologie de grootste invloed zal hebben op het werk in 2020, komt Big Data als winnaar naar voren. Maar liefst 99 procent van de respondenten noemt deze technologie. Opvallend is dat AI vlak daarna met 97 procent op een tweede plek eindigt; respondenten beschouwen AI als meer dan een hype. Sterker nog, de verwachting is dat AI een centrale plek zal innemen in het toekomstige werk in Europa.
 
Aan de andere kant kunnen late adopters een gezamenlijk verlies van 761 miljard euro verwachten in 2018, zo blijkt uit het onderzoek.
Een derde van de ondervraagde managers geeft aan dat hun werkgever in hun ogen niet beschikt over de kennis en kwaliteiten om de juiste digitale strategie in te voeren of zelfs geen idee heeft van wat er gedaan moet worden. 30 procent van de ondervraagden is van mening dat hun leidinggevenden te weinig investeren in nieuwe technologieën, terwijl 29 procent terughoudendheid ondervindt in het toepassen van nieuwe manieren van werken.
 
De belangrijkste obstakels voor bedrijven om de overstap te maken naar digitaal zijn angst voor beveiligings-issues (24%), budgetbeperkingen (21%) en een gebrek aan talent (14%).
 
Euan Davis, European Head of the Centre for the Future of Work bij Cognizant, licht toe: “Om de noodzakelijke stap te kunnen maken naar digitaal, moet het management proactief zijn en hun organisatie voorbereiden op toekomstig werk. Langzame innovatierondes en onwil om te experimenteren zijn de doodsteek voor organisaties om digitale mogelijkheden goed te kunnen benutten. Het beheren van de digitale economie is een absolute noodzaak voor organisaties. Bedrijven die geen prioriteit geven aan het verdiepen, verbreden, versterken of verbeteren van hun digitale voetafdruk, spelen bij voorbaat een verloren wedstrijd.”
 
Over het onderzoek
Uitkomsten zijn gebaseerd op een wereldwijd onderzoek onder 2.000 executives in verschillende industrieën, 250 middenmanagers verantwoordelijk voor andere werknemers, 150 MBA-studenten van grote universiteiten wereldwijd en 50 futuristen (journalisten, academici en auteurs). Het onderzoek onder executives en managers is in 18 landen uitgevoerd in het Engels, Arabisch, Frans, Duits, Japans en Chinees. Executives zijn daarbij telefonisch geïnterviewd, managers via een online vragenlijst. De MBA-studenten en futuristen zijn in het Engels ondervraagd via telefonische interviews (MBA studenten in 15 landen, futuristen in 10 landen). The Work Ahead – Europe’s Digital Imperative bevat de 800 reacties van het Europese onderzoek onder executives en managers. Meer details zijn te vinden in Work Ahead: Insights to Master the Digital Economy.
 
Source: emerce.nl, 28 november 2016
How blockchain can change the music industry

 gettyimages-177249851Since the 1999 launch of Napster’s music-sharing platform, the music industry has been in near-constant turmoil, its timeline marked with dipping revenues, lack of transparency, piracy problems and feuds over the fair distribution of dividends.
 
Music companies hate streaming services. Streaming services hate file-sharing services. And, most of all, artists and content creators hate virtually everyone else for making huge sums off their toil and feeding them the crumbs.
 
With so many conflicts of interest, there seems to be no one service or business model that can work in a fashion that satisfies the needs of all the parties involved. But now, after years of suffering from a thorny and complicated relationship with the tech sector, the music industry might finally find a chance to head in a positive direction by leveraging the blockchain, the technology that powers the bitcoin cryptocurrency.
 
The blockchain has drawn the attention of investors and professionals in different industries, and is now showing promising signs to change the music industry in ways that might fulfill the needs of everyone.
 
Well, almost everyone.
 
Why can blockchain be a good technology for music distribution?
At its core, the blockchain is a distributed ledger that can validate and register transactions without the need for a central authority. No one owns the ledger — it’s spread across the nodes that constitute its network and is publicly available to everyone.
 
Information stored on the ledger is interrelated through cryptographic hashes, which make it virtually irreversible and tamper proof. In a nutshell, it means that parties can make peer-to-peer exchanges of data, money or anything else of value in any amount and in a secure manner.
 
In the music industry, the blockchain could transform publishing, monetization and the relationship of artists with their communities of fans.
 
First, music can be published on the ledger with a unique ID and time stamp in a way that is effectively unalterable. This can solve the historic problem of digital content being downloaded, copied and modified at the leisure of users. Each record can store metadata containing ownership and rights information in a transparent and immutable way for everyone to see and verify. This will ensure that the correct people will get paid for the use of the content
.
Blockchain technology can also revolutionize the monetization of music. The infrastructure is based on smart contracts, programs that can be run on the blockchain along with the payment transactions. Blockchain-based cryptocurrencies such as Bitcoin and Ethereum support micropayments, which is effectively impossible with classic payment mediums due to transfer costs. This can support a new way of offering on-demand music services. Users can select the record of their choice and immediately reward the stakeholders with cryptocurrency upon playing it.
 
And, finally, one of the advantages of a blockchain ledger is that it can establish a more direct relationship between creators and consumers. Composers and artists will no longer be required to go through purchasing platforms and financial brokers — who usually take a hefty cut of the revenue — and can get directly compensated every time their songs are played. This can be a boon to all those amateur producers who don’t have the backing of huge record labels.
 
Startups and musicians embrace blockchain technology
Companies like Benji Rogers’ online music platform PledgeMusic have published a comprehensive blueprint for the Fair Trade Music Database, a globally decentralized blockchain-based ledger that can solve the problems of ownership, payments and transparency.
 
Creators can upload their music and the associated metadata on the ledger. Companies and consumers can search and play the music of their choice off the ledger, and smart contracts will ensure that the owner(s) of the content will be paid automatically for its usage. The database would store .bc or “dotblockchain” records, which Rogers describes as “a codec that cannot be separated from its rights.”
 
PeerTracks is another music startup that is getting ready to launch its platform and is betting big on blockchain. PeerTracks is a sort of artist equity trading system that makes it dramatically easier to manage royalties and revenue, making it especially convenient for artists who can’t afford to pay someone else to do it. The system leverages the MUSE blockchain, a ledger engineered for the music industry.
 
The company claims PeerTracks will enable artists to instantly claim 90 percent of their sales income, rather than the approximate 15 percent they currently get.
PeerTracks also introduces the concept of “artist tokens,” a limited and tradable cryptocurrency that artists hand out to their fans and which finds its value from the popularity of its creator. Higher demands for coins created by a specific artist will increase its worth. According to PeerTracks CEO Cedric Cobban, the token system “translates to crowdfunding, fan engagement, talent discovery and community building on scales we’ve never seen before.”
 
BitTunes, yet another blockchain startup, wishes to deal with another problem, digital music piracy, with a carrot-rather-than-stick approach, as Simon Edhouse, the company’s managing director puts it. The company offers a bitcoin-based peer-to-peer file-sharing platform that enables ordinary people to become a distribution channel for their own digital music — and earn money.
 
Last year, award-winning musician and songwriter Imogen Heap started work on a new music ecosystem, which she calls Mycelia. Based on blockchain technology, the platform will enable direct payments for artists and give them more control over how their songs and associated data circulate among fans and other musicians. She describes the effort as “trying to take away the power from top down and give power, or at least a steering, to the artist to help shape their own future.”
 
Is blockchain the music industry’s silver bullet?
As with any solution, blockchain will not be a perfect answer to all the problems that the music industry is facing. But at the very least, it will level the playing field to some degree. And artists, songwriters, performers and musicians — the real owners of the industry — will be the main benefactors, for they will finally be able to own their creations and get their due for their efforts.
 
However, it will likely not be welcomed by those who profit from a lack of transparency in the music industry, or big tech companies that prefer to monopolize rather than share. And clashes are likely to ensue if the idea actually gains traction and real momentum.
 
But as Rogers explains in a follow-up to his original article, “the money being left on the table is dwarfing the money being made under the table,” which means that overall, a transparent system would generate much more revenue and create more opportunities than it would actually destroy.
 
Similar articles on BI Kring
How blockchain can change the future of IoT
How blockhain can change the music industry
 
source: techcrunch.com, October 8, 2016
How blockchain can help fight cyberattacks

 blockchainImagine a computing platform that would have no single point of failure and would be resilient to the cyberattacks that are making the headlines these days. This is the promise behind blockchain, the distributed ledger that underlies cryptocurrencies like Bitcoin and Ethereum and challenges the traditional server/client paradigm.
 
In 2009, Bitcoin became the first real application of blockchain, a secure decentralized monetary exchange platform that removed the need for central brokers. More recently, blockchain has proven its worth in other fields.
 
Blockchain is the culmination of decades of research and breakthroughs in cryptography and security, and it offers a totally different approach to storing information and performing functions, which makes it especially suitable for environments with high security requirements and mutually unknown actors.
 
The concept is already being used in several innovative ways to enhance cybersecurity and protect organizations and applications against cyberattacks.
 
Preventing data manipulation and fraud
One of the main characteristics of the blockchain is its immutability. The use of sequential hashing and cryptography, combined with the decentralized structure, make it virtually impossible for any party to unilaterally alter data on the ledger.
 
This can be used by organizations handling sensitive information to maintain the integrity of data, and to prevent and detect any form of tampering.
Guardtime is a data security startup that is placing its bets on blockchain technology to secure sensitive records. It has already used blockchains to create a Keyless Signature Infrastructure (KSI), a replacement for the more traditional Public Key Infrastructure (PKI), which uses asymmetric encryption and a cache of public keys maintained by a centralized Certificate Authority (CA).
 
Matthew Johnson, CTO at Guardtime, believes that while PKI was a suitable technology for digitally signing software, firmware and network configurations, it was never designed to authenticate data.
 
“The fundamental threat with PKI is that you need to base your security on the secrets (keys) and the people who manage them,” Johnson says. “That is very hard to do well and impossible to prove — just as in the real world you can‘t prove a secret has been kept, in the security world you can‘t prove a key has not been compromised.”
Blockchain-based security is predicated on distributing the evidence among many parties.
 
In contrast, instead of relying on secrets, blockchain-based security is predicated on distributing the evidence among many parties, which makes it impossible to manipulate data without being detected.
 
“Blockchain has eliminated the need for trusted parties to verify the integrity of data just as in the cryptocurrency example it eliminated the need for a centralized authority to act as a bank,” Johnson explains.
 
KSI verifies the integrity of data by running hash functions on it and comparing the results against original metadata stored on the blockchain. “This is a fundamentally different approach to traditional security,” Johnson says. “Rather than using Anti-Virus, Anti-Malware and Intrusion Detection schemes that search for vulnerabilities, you have mathematical certainty over the provenance and integrity of every component in your system.”
 
KSI is already being considered by organizations such as the Defense Advanced Research Projects Agency (DARPA) to protect sensitive military data, and by the Estonian eHealth Foundation to secure over one million health records.
 
Preventing Distributed Denial of Service attacks
On October 21, millions of users across the U.S. were cut off from major websites such as Twitter, PayPal, Netflix and Spotify. The reason was a massive DDoS attack that brought down the DNS servers of service provider Dyn.
 
The episode was a reminder of how a weakness in the current backbone can become a bottleneck and a point of failure in a system that involves thousands and millions of nodes and users.
 
“The killer weakness of the current DNS system is its overreliance on caching,” says Philip Saunders, founder of Nebulis, a distributed, blank-slate DNS system. “This is what allows China to poison its DNS nameservers, censoring key social networks and banned keywords. At the same time it is also what makes it so easy for millions of autonomous devices under the control of malicious code to shut down whole networks and have these interruptions persist.”
 
Blockchain offers a solution, Saunders believes, a decentralized system would make it literally impossible for the infrastructure to fail under an excess of requests.
 
Nebulis uses the Ethereum blockchain and the Interplanetary File System (IPFS), a distributed alternative to HTTP’s centralized structure, to make its DNS infrastructure immune to DDoS attacks.
 
“Blockchains, particularly the Ethereum platform, can allow a different approach,” Saunders explains. “Only changes or updates to the record cost money in the form of network fees, but reads are free, as long as you have a copy of the blockchain.”
 
As Saunders explains, with the Ethereum blockchain, you read straight from your own copy without imposing costs on the network. “This has great potential for lifting a great deal of pressure from the physical backbone of the internet,” he says. “It also means we can do away with many of the redundancies of the traditional DNS and come up with something which is much better.”
 
The team has finished the first draft of the Nebulis directory, which is currently undergoing testing. They plan to launch the first iteration of the directory soon.
 
Preventing data theft in untrusted environments
Encrypting data has now become a norm across organizations. However, when you want to act upon that data, you’ll have to decrypt and reveal its contents.
“Currently, there’s really no option for computing over encrypted data in the market,” says Guy Zyskind, founder and CEO of Enigma, a decentralized cloud platform based on blockchain. “The result is that we can only encrypt data at rest (i.e. while being stored on disk) or in-transit (sending over the wire), but not in-use. This means that when we process data, in whatever way or form, we end up decrypting it. This poses the usual risks associated with data breaches — an attacker with access to a system can see the plain-text data.”
 
Another problem pertains to the fact that we live in an era of cloud and on-demand services, where our data is accessed and processed by untrusted third parties.
 
“There are many situations where we want to jointly work on data without revealing our portion to untrusted entities,” Zyskind says. “This happens constantly in the business world, where companies would like to collaborate without revealing sensitive information that they are prohibited from sharing due to security, privacy and even regulation reasons. Similarly, we’re seeing more peer-to-peer systems where users themselves would like to maintain their privacy and anonymity.”
 
Enigma enables different participants to jointly store data and run computations while maintaining complete privacy. The platform uses blockchain to record time-stamped events and hashes of files that prevent attackers from hiding their tracks if they manipulate data.
 
Additionally, Enigma uses Multi-Party Computation (MPC), a cryptographic technology that performs computations by distributing data and tasks among multiple untrusted parties and making sure each party only has partial access to the data. “The parties are trusted as a whole, decentralized unit, but not individually,” Zyskind explains.
According to Zyskind, the combination not only prevents data from being tampered with, but also protects it from falling into the wrong hands. “The main point to consider is that the two technologies are complementary — both are needed to protect against a wide spectrum of cybersecurity threats,” he says.
 
The paradigm can be used in several settings involving parties that cannot directly share data with each other but have the need to perform joint operations over it. Potential use cases involve simple tasks like bookkeeping, aggregations and generating simple statistics. It can also be used to train machine learning models over encrypted data sets owned by different parties.
 
Enigma also can be used in fraud detection, where organizations can jointly execute fraud-detection algorithms over their encrypted data without compromising privacy.
 
Blockchain and the future of cybersecurity
Blockchain provides a fundamentally different approach to cybersecurity, which can go beyond endpoints and include user identity security, transaction and communication security and the protection of critical infrastructure that supports operations across organizations.
 
The paradigm shift represented by blockchain can provide the transparency and auditing that will enable us to make the most use of shared online services, while eliminating the potential security and privacy trade-offs.
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Re: 2017 Investment Management Outlook
« Reply #1 on: August 10, 2017, 10:31:54 am »
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