Bitcoin services company Coinplug has snatched the top prize in a financial technology competition sponsored by major banking group JB Financial Group.
Over 100 companies vied for a total prize pool of 130m Korean won ($116,200) at the FinTech Frontiers Fair held in Seoul, South Korea.
JB Financial Group is a financial services company with over 35.5 trillion Korean won ($32.3bn) in assets and 3,300 employees. It is one of the leading innovators of financial technology in East Asia.
Coinplug‘s winning entry, which scored 50m KRW ($45,500), was a system utilizing the bitcoin blockchain to verify user identity in online transactions. It works by taking a cryptographic hash of a user’s personal information and using that hash to create a certificate, which is then recorded on the blockchain as a transaction.
The blockchain’s permanence means that information cannot be altered or modified once saved. Personal information is further protected from leaks, since Coinplug uses only the hashed information to verify, never seeing the original. No personal information needs to be stored at all.
Benefits over existing systems
Coinplug CEO Ryan Uhr told CoinDesk the system offered three main benefits: accessibility on more web browsers, security of private information, and reduced cost of issuance.
The blockchain system can be used in any web browser and does not require additional software such as ActiveX or NPAPI, which need plugins for proper operation. The certificates can also be re-issued easily on Coinplug’s smartphone application.
Coinplug is already in talks with several financial organizations who are interested in offering the service, and Uhr said winning first prize at a mainstream even definitely made other companies pay attention.
“When blockchain-based authentication systems become a widely used method for financial transactions and e-commerce payments, there will be a very interesting and noticeable change in the market for user certification.”
South Korea’s e-commerce and banking systems are currently required to authenticate users with Microsoft’s ActiveX technology, running only on Windows and in the Internet Explorer browser (see details below).
Coinplug’s system would also deliver significant cost savings, Uhr added.
The current market size of Korea’s user certificate system is around 120bn KRW ($110m), with each new certificate issuance for an individual running at 4,400 KRW ($4) and 110,000 KRW ($110) for a corporation. Registering instead through the blockchain would cost just the 0.0001 BTC (30 KRW, or 3 cents) transaction fee.
Coinplug now needs to wait for official government approval to work its system into the national financial infrastructure.
Particularly important for Korea
Coinplug’s use of blockchain technology could free Koreans from a legacy 1990s e-commerce law unique to that country, one that has prompted several security concerns.
In that decade, South Korea developed a local encryption system called SEED, designed to encourage e-commerce by providing user authentication with digital certificates. The only problem was that all e-commerce sites needed to verify the certificates with Microsoft’s ActiveX plug-in.
Since ActiveX is supported only on Windows, Korean users were locked into using that system and the Internet Explorer browser. ActiveX is known to have several security flaws, increasing risk of hacking attacks and personal information leaks, with even Microsoft now discouraging its use.
This system is only now beginning to disappear from Korean networks. A law in 2010 mandates that companies who wish to authenticate users with non-ActiveX technology must prove to the government their system offers the same level of insurance.
Seoul image via Shutterstock