Connect with us

Finance

WHY ATTACKS ON CRYPTOCURRENCY EXCHANGES SHOW NO SIGNS OF SLOWING DOWN

Ray Pompon, Principal Threat Research Evangelist, F5 networks

 

Hackers have a soft spot for targeting cryptocurrencies thanks to a lack of heavy regulation unlike traditional financial services. Cryptocurrency funds have no legal obligation to implement protection measures, so inherently they are not as exhaustive or technical. This makes them prime targets for hackers. Transactions can be extremely difficult to reverse, so although some funds cover customer losses, the reality is that if the exchange stretches into the millions, they have no obligation to help.

 

Bitcoin is now worth $3.5k, despite major fluctuations in value. For perspective in 2011, Bitcoin had parity with the US dollar, so the opportunities for hackers targeting cryptocurrencies have skyrocketed in recent years. Over the last seven years, F5 Labs has noted an almost twelve-thousand-fold increase in crypto theft and identified 73 major cryptocurrency incidents, each costing on average, a crippling $31 million.

 

Ray Pompon

The victims of cryptocurrency thefts

Many technological services in the cryptocurrency industry are targets for cybercriminals, but the most commonly hit technical services, according to F5 Labs research, are cryptocurrency exchanges (63% of incidents). These are the digital equivalent of currency exchanges enabling customers to buy or sell various cryptocurrencies, making them an obvious nexus for high value transactions.

 

Cryptocurrency uses storage mechanisms called wallets, of which there are two kinds. A “hot wallet” is Internet-connected and used to store cryptocurrencies used for day-to-day transactions –  basically the equivalent of your real-life wallet. Hot wallets can run on cryptocurrency exchanges for easy trading, but they can also run as client software on a computer or mobile device. As a result, hot wallets are more likely stolen by cyber-criminals.

 

To reduce the risk, cryptocurrency technology also leverages “cold wallets” that are not connected. The best cold wallets are air-gapped systems, such as a USB stick with a strong password. Within cryptocurrency exchanges, cold wallets exist as separate, strongly-encrypted databases requiring a wallet owner to unlock it with a private key. Of the known attacked technologies, hot wallets within exchanges are ripped off three times as much as cold wallets. Wallet software for clients that is outside of an exchange can also be attacked. These incidents currently represent around one seventh of all cryptocurrency thefts.

 

Mining services are another potentially hackable cryptocurrency technology, although this is a relatively rare occurrence.

 

What does the future hold for protecting cryptocurrency exchanges

Applications are complex conglomerations of interacting services in a variety of environments, glued together with APIs, authentication credentials, and networks. This means they have an extensive attack surface and therefore need extensive security testing and protection.

 

Regulating the cryptocurrency industry is finally becoming a priority for governments around the world, and some have already begun defining cybersecurity measures. For instance, many countries are looking at Korea Regulation 5.5.7 (Regulation on Supervision of Electronic Finance) as one of the leaders in this respect, as it treats cryptocurrency exchange cybersecurity measures in the same way that a financial institution would. This is an example that should be followed and embraced, as one of the most effective ways to protect cryptocurrency exchanges, especially if the cryptocurrency industry continues growing at its current rate.

 

 

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

THE INEFFICIENT MARKETS THEORY

Fraser Thorne, CEO at Edison Group

According to accepted financial thinking The Efficient Market Hypothesis (EMH) asserts that, at all times, the price of a security reflects all available information about its fundamental value.  So current prices are the best approximation of a company’s intrinsic value.

If that is true then why are so many companies being taken over at values of up to 70% more than their stock market price?.  What is the market missing?  Either accepted economic thinking is wrong or it is suffering from a period of abnormality or maybe something more fundamental is taking place.  Something which challenges the hypothesis of existing theories as to how share prices are created.

In recent months FTSE 100 businesses G4S and Royal Sun Alliance (RSA) have both been bid targets with insurer Hastings Group Holdings plc and Urban&Civic plc falling to earlier bid, following other leading industry names such as Macarthy & Stone .  Even the doyenne of roadside assistance the AA was finally taken off the market following a 6 year downhill journey.

A common feature is the gulf between the company’s stock price when the bid was launched, and the stock price offered by the potential acquirer. Yet if companies took advantage of the IR resources at their disposal, which have been significantly enhanced as digital capabilities have been developed as a result of COVID-19, this share price gap would have been considerably narrower or the companies might not have been the subject of a bid at all – potentially saving millions in defence fees.

Struggling stock prices have, of course, been a key stock market feature during the pandemic. Like many listed companies, G4S´s stock price fell sharply in the spring and then gradually recovered in the early summer to around 110p – still well short of the 200p at the start of this year – when Gardaworld made its first bid of 145p. Gardaworld’s final bid in December of 235p a share, was not enough to win the competition with Allied Universal trumping them at 245p cash. A 70% premium to G4S’s share price when Gardaworld’s first bid was made. The stock now trades at 257p implying some believe the bidding war may rumble on.

Similarly, Urban&Civic received a bid of 345p from Wellcome Trust, a 64% premium on its trading price at the time, RSA a joint bid from Intact Financial and Tryg, of 685p, a 49% premium and Hastings a 250p bid from Dorset Bidco, a 47% premium.

While the AA bid was at a premium of 40% to its price 4 months prior or 230% from its lows in February.  Even serial underperformer Talk Talk was taken over at a 16% premium.

Having reviewed a number of deals over the past six months most had a bid premium of over 40%+ which compares with an average of 15% for the previous two decades.

Takeovers are natural part of corporate development and a key requirement for markets to function efficiently.  But their value to shareholders has to be set against the recognition of the underlying value of the business before the bid is made.  A premium is normal and is normally required for control but what is most notable is the scale of such premiums.  Such price mismatches challenge the foundations of economic thinking, the market is not efficient.

A 10% bid premium is good, 15% very good and anything north of that is exceptional but this depends on the underlying price before the first bid is made.  Numbers in excess of 20% suggest the underlying stock is mispriced and therefore the stock market is inefficient.  This is hard to fathom in age of open access to so much information but the numbers demonstrate a dislocation between the stock markets value what others are prepared to pay for exactly the same assets.

True, bid prices are not always representative of the value of a business and its future cash flows might improve as a result. But one has to review the fundamentals of stock market valuations when the world’s largest security business can be undervalued by 200%+. Does the market lack the relevant information about the business outlook to make the same assessment as the bidder?  Is it that the market is dominated by analysts whose collective glass is half empty?  Or maybe it is the risk averse nature of large, bureaucratic investment houses who hope to demonstrate their precise calculations to reassure fund holders that they are looking after their savings.

Some of the quoted discount results from the public/private differential of the cost of capital and the tax treatment of debt v equity.  But perhaps a more obvious challenge has to be met by the companies and their boards’ – make sure everyone recognises your value, not just a potential bidder.

With as much investment now funded via debt (PE) as by quoted equity financial theories need a much wider lense. The efficient market hypothesis can only be applied to the market if investors and analysts incorporate the activity of the wider economic and investmsnt market.  This must include the valuations applied to private companies.  It is a great irony that in the age of the internet he time when more and more information is freely available to all markets are seemingly becoming less efficient.

The cost of private v quoted capital plays a part as does the massive growth of private equity v quoted funds, with active money halving in percentage terms in the last 20 years.

EMH theory came to prominence at a time of relative stock market stability, before international takeovers had come into vogue and in a time of greater higher interest rates.

 

US Mergers since 1897

According to Keynes “markets can remain irrational longer than you can stay solvent” and while they may re balance in the long run they can experience long periods of price dislocation.  We are not talking days but months or even years in some extreme cases.  Long enough for those closest to the business (the board) to highlight the error and try to rebalance it.

If the stock market cannot see the value opportunity then maybe it is not being given the full picture.   When that is the case then it is the obligation of the board to put the market right, yes the business needs to deliver what it promises but the other side of that is to highlight to investors how they will long term returns for shareholders.

While public perception may be that M&A deals and takeovers are decided by thrusting company directors, brave bankers and diligent lawyers, heroically fighting their corners in smoke filled boardrooms.

The reality is that these situations can only arise either when resources are scarce ie a mega merger between two dominate indsurty players scarping over a low growth or shrinking market or if one neglects its duty to achieve a proper value for its shares in the most public of arenas the stock market.

Certainly, the current gulf between share and bid prices suggests that management teams are not doing enough to properly communicate the value of their business to the wide variety of investors, which have holdings in their company.

In these uncertain economic times, clear and direct communication with investors is more important than ever. But not only do management teams need to communicate effectively with their existing investors, reaching out to potentially new investors who are likely to back an existing management team is also important.

A healthy share register is a diverse register incorporating all types of investors from retail through to the large institutions.  This means reaching out to a wide and fragmented audience.  The modern investment landscape is increasingly characterised by new and exciting pools of capital.  The growing significance of these new pools and the value of funds they represent is magnified as a result that active funds have shrunk as a percent of global funds under management by up to 30% in the last 20 years.  Boards should focus on building a more diverse and engaged share register, reach out beyond the more mainstream institutional investors to include, family offices, private wealth managers and the end individual investor herself.  To ignore this part of the market could be the difference between success and failure in a bid, just ask the board of GKN.

 

To address these issues, the IR industry has been adopting to a new level of innovation and tech-enabled solutions to respond effectively to these demands. For example, Edison has developed a new market-leading digital approach, which harnesses the latest in data and tech-driven tools, effectively transforming and enhancing the firm’s IR capability to not only efficiently reach out to existing holders but also to target new investors, which in an unwelcome bid situation could make all the difference between independence and redundancy.

Edison’s starting point is to monitor the behaviours of tens of thousands of investors by using smart targeting, with algorithms identifying not just interest but interest with intent to buy. These ‘propensity to purchase signals’ are detected via Edison’s digital content tracking system, InvestorTrack® and layered over market activity and fin depth knowledge of funds flows.

The recent spate of high premium bids highlights management failures to invest in their capital market communications.  It is not sufficient to concentrate on the top holders, nor to assume that exhaustive meetings with the sell side is an effective way to get your message carried to the wider market, in the format you want.

Initiating a bid is expensive, even more so defending one.  The combined advisory fees alone in the G4s bid are estimated to be in excess close to $30m or close to the annual IR budget of the combined FTSE100.  If the FTSE was repriced to close the average bid premium of the last two decades then it could increase in value by more than £300bn.

So, the choice appears straightforward: implement a long-term IR strategy, utilising all the modern digital methods now available to robustly communicate a company’s commercial case and strategy so the business is as fully valued as possible, or neglect this and risk a future bid and if it transpires then spend potentially millions of shareholder funds in fees in a possibly futile attempt to protect the company’s independence. If I was part of a senior management team, I know which option I would choose..

 

Continue Reading

Finance

HOW WILL WE PAY IN 2021?

Nick Corrigan, UK & Ireland Managing Director, President of Global Payments.

 

As 2020 began, there was already much conversation about the pace of change in the payments space. New players were frequently appearing as Open Banking opened the doors to new fintechs with different business models, and incumbents ramped up adoption of cloud technology to future-proof their businesses. But the Covid-19 pandemic has catalysed change and innovation at an unforeseen pace, out of pure necessity. With customers no longer frequenting physical stores, reluctant to handle cash and relying heavily on online services to feed, clothe and entertain themselves, the payments industry has had to adapt quickly. The question is, which of these changes are here to stay, and what trends will dominate the conversation in 2021?

 

Brands go direct-to-consumer

It goes without saying that the pandemic has forced us to re-evaluate our relationship with physical stores, irreversibly changing how we view them. Good examples include Nike, Brewdog and Harry’s, whilst Shopify has seen dramatic success in the small merchants needing to go online. This year, we’re going to see an increase in the ‘direct-to-consumer’ play. Brands big and small who previously had a distinct distribution channel e.g. through supermarkets, multi brand outlets or dedicated stores for example, will look more deeply at their distribution models and use technology as the enabler for this. As part of this, they will ramp up efforts around their social presence and communication, apps, loyalty programmes and websites. They will embed the payment process, making it almost impossible for consumers to want to visit a third-party physical store.

Nick Corrigan

This will in turn fuel the subscription economy and we’ll see consumers increasingly harnessing the opportunities there now are to have things like razors or fitness juices delivered to their doors monthly via an app, as opposed to shopping for them in a supermarket. This movement of reclaiming direct consumer interactions and cutting out distribution partners presents massive opportunities for brands. They will now have the data – and the resulting insights – gained from controlling more of the payment flow to strengthen relationships, and in turn, strengthen their revenue.

 

Tech players ramp up payments prowess

In 2021, we’re going to see tech giants continue to increase their efforts when it comes to payments and broader financial services. Amazon Pay, for example, is fast becoming a standard payment method for purchases outside of its own website. While at the moment it is mostly limited to Amazon storing your card details to enable one-click payments, we’ll begin to see tech giants start to come up with their own payments products so that they can control the complete flow of the payment.  The natural next step from consumers using the platform merely to access their card, is that they might have a credit line with the platform in question and offerings beyond buy now pay later as the tech firms disintermediate the traditional financial services supply chain.

 

Open Banking gains pace

Most consumers are still unaware of this new service, but as more merchants have an opportunity to offer this solution and integrate into their payment options, they have a great opportunity to reduce their costs for payments by not using the traditional routes under Visa and Mastercard. While these entrenched payments rails have a very important place, offering protection for bigger purchases like a TV or a holiday, they aren’t needed for many consumer purchases. It’s unlikely you’re going to seek a refund and have to have a chargeback raised for a cup of coffee or an insurance renewal, which is what these big networks are so vital for facilitating.

When you take these types of credit and debit card purchases, about 30% of them could sit outside of the typical network ecosystem. This is why we’re seeing banks quickly launch their Open Banking services, specifically for these types of scenarios. In 2021, Open Banking is really going to start doing what it was intended to do: increase competition.

 

Looking ahead

The way we pay was already evolving due to Open Banking, BigTech and the explosion of ecommerce. But adapting to the pandemic meant rapidly adapting to new technologies, and nobody is likely to look back. The economic impact of 2020 means that budgets and purse strings will be tighter in 2021, and companies will be looking to find ways to make their payments infrastructure cheaper without compromising security. The promise of new opportunities to monetise data will also bring in new players and new technologies as businesses seek to own more of their payment lifecycle. This had been a year of intense change, and 2021 shows no promise of slowing down.

 

Continue Reading

Magazine

Trending

News11 hours ago

FUJITSU’S CTO, FINANCIAL SERVICES – IAN BRADBURY – SHARES HIS TOP PREDICTIONS FOR THE FINANCIAL SERVICES INDUSTRY IN 2021

At the beginning of the year, financial institutes were excited by the prospect of a new decade. The advent of...

Business2 days ago

HOW TECHNOLOGY IS MAKING AIRLINES SMARTER DURING LOCKDOWN

Captain Nadhem is the General Manager of Alpha Aviation UAE   2020 has provided challenges to all industries, but few...

Business2 days ago

THE INEFFICIENT MARKETS THEORY

Fraser Thorne, CEO at Edison Group According to accepted financial thinking The Efficient Market Hypothesis (EMH) asserts that, at all...

Finance2 days ago

HOW WILL WE PAY IN 2021?

Nick Corrigan, UK & Ireland Managing Director, President of Global Payments.   As 2020 began, there was already much conversation...

Top 102 days ago

WHY BETTER PLANNING COULD BE THE INSURANCE INSURERS NEED

Adam Bimson, Chief Customer Officer, Vuealta   Insurance is predicated on the ability to plan effectively, to model accurately, and...

Business2 days ago

WHY IT IS MORE IMPORTANT THAN EVER TO SHOP SOCIAL

Dave Linton is an innovator, social entrepreneur, thought leader, mentor of social enterprises, motivational speaker and the founder and Managing...

Finance3 days ago

HOW COVID-19 HAS RESHAPED THE PAYMENTS LANDSCAPE

By Mohamed Chaudry, Group Chief Financial Officer of FoodHub   The year 2020 may well have sounded the death knell...

Business3 days ago

CREATING A PEOPLE-CENTRIC WORKPLACE CENTERED ON FLEXIBILITY, EXPERIENCE AND WELLBEING

By Anne Marie Ginn, Head of Video Collaboration, Logitech EMEA   The light is appearing at the end of the...

News3 days ago

UK OPEN BANKING FINTECH YAPILY ANNOUNCES EXPANSION IN VILNIUS

Yapily, a London-based fintech startup, has announced plans to set up in Vilnius, the company’s third European office. Yapily joins...

News3 days ago

FINTECH EEDENBULL SECURES PAYMENT TECHNOLOGY DEAL WITH NATIONAL AUSTRALIA BANK

EedenBull has announced a five year agreement with National Australia Bank (NAB), which allows the bank to deploy EedenBull’s innovative...

News3 days ago

MARQETA ANNOUNCES PARTNERSHIP WITH GOLDMAN SACHS ON MARCUS CHECKING OFFERING

Marqeta’s modern card issuing platform will be leveraged by Marcus by Goldman Sachs to build new digital banking offerings.    Marqeta,...

Finance5 days ago

MAKE 2021 THE YEAR YOU DRAW UP A PERSONAL BUDGET

By Neli Mbara, Certified Financial Planner at Alexander Forbes   Budgeting is the most important thing you can do to manage...

News5 days ago

FINTECH EEDENBULL SECURES PAYMENT TECHNOLOGY DEAL WITH NATIONAL AUSTRALIA BANK

EedenBull has announced a five year agreement with National Australia Bank (NAB), which allows the bank to deploy EedenBull’s innovative payment...

Finance5 days ago

GEOSPATIAL DATA VISUALISATION MAKES SENSE OF MASS OF COMMERCIAL PROPERTY INSURANCE DATA

Heikki Vesanto, Manager GIS Data Science, LexisNexis Risk Solutions UK & I   Like most areas of the general insurance...

Top 105 days ago

A GUIDE TO HMO PROPERTY INVESTMENT

Many experienced property investors are turning their attention to HMOs and achieving much higher rental yields as a result. Find...

Finance5 days ago

PROTECTING THE DIGITALLY-EXCLUDED: BIOMETRIC IDENTIFICATION ENSURES ACCESS TO PAYMENTS IN A CASHLESS WORLD

By Vince Graziani, CEO, IDEX Biometrics ASA   The events of this year have exacerbated a number of challenges for...

Interviews5 days ago

‘GLOBAL TRADE IN 2008 VS 2021: GLOBAL IMPACT, DIFFERENT CHALLENGES’

A Q&A with Nawaz Ali Head of Insights at Western Union Business Solutions who draws comparisons between the financial crisis...

Finance5 days ago

FOUR WAYS OF FINDING THE SUPPORT AND RESISTANCE LEVELS

Support and resistance levels are mainly conventional values where a large number of orders assemble to stop a prevailing trend...

Finance6 days ago

TAX-FREE SAVINGS ACCOUNTS OR RETIREMENT ANNUITIES: KNOW THE SAVINGS PRODUCTS AVAILABLE TO YOU

By Michael Kirkpatrick, head of individual consulting best practice, Alexander Forbes   The start of a year is a great time...

News6 days ago

FROM PLASTIC WASTE TO PAYMENT CARD

Giesecke+Devrient invites to join the cause of saving the oceans.   Giesecke+Devrient (G+D) and the environmental organization Parley for the...

Trending