Protecting Blockchain Investments with AI-Based Due Diligence
It’s no secret that blockchain technology is a disruptive force in the finance world through its promises of innovation and decentralized ecosystems. Blockchain and crypto startups are also attracting massive institutional capital - some estimates put investments at more than $90 billion as of February. However, with great opportunity and value comes great responsibility, particularly when it comes to securing money that leverages blockchain technology. Since 2022, the total value lost in the blockchain space is substantial - more than $6B - prompting traditional finance organizations investing in the industry to reevaluate their risk management strategies.
As the demand for blockchain investments grows, the demand and expectations for addressing security and financial risks facing blockchain-based companies should also grow. Lockchain.ai helps meet that demand by enabling analysts and investors to do their due diligence, providing a platform that delivers a holistic view of real-time, continuous blockchain risk intelligence.
The blockchain space is unique, presenting a combination of people, organizational, financial and technological risks. Speed is of the essence in this dynamic environment where events unfold rapidly, and organizations can’t rely on humans to react to the volume of potential threats quickly enough. Understanding and reacting to this reality requires a tool that provides an ongoing, comprehensive view of the landscape and potential future risks.
Lockchain.ai's platform offers this multifaceted window into the security risk of an organization. Designed for users of all technical proficiencies, it empowers traditional financial institutions to comprehend complex security landscapes. The platform combines multiple checks across three key domains: organizational trust, external resilience, and security. It also leverages AI to ingest information from multiple sources and evaluate it against a set of criteria we developed to marry both basic risks and novel threats of the blockchain ecosystem with battle-tested traditional cybersecurity and trust principles.
It’s critical to keep in mind that traditional approaches investors use to address potential risk like quarterly or yearly check-ins are woefully insufficient in the blockchain space. The interconnectedness of entities in the blockchain ecosystem necessitates continuous monitoring so organizations can take a proactive approach to security and risk management.
Lockchain.ai's platform maps these dependencies, identifying how a risk event in one portion of the ecosystem can have a contagion effect on others. This feature can show platform users the contagion risk of their investments in black swan events, such as what we saw with FTX. It also ensures real-time monitoring for market changes and potential risk events, surfacing relevant information for proactive risk management. Some examples of platform benefits identified by our design partners and beta users include venture capital firms conducting due diligence before a funding round, streamlining the processes for institutional compliance officers to evaluate pre-trade risks more effectively, assisting ETF issuers monitor asset custody providers, and helping traders assess and monitor post-trade risks to their positions.
As traditional finance organizations work to navigate the complexities of blockchain investments and bring in new capital, a paradigm shift in risk management is imperative. At Lockchain.ai, we’re working to ensure our platform helps traders and investors meet the moment, enabling them to do the necessary due diligence and fill technical gaps when it comes to addressing blockchain risks.
In an industry where speed and agility are paramount, the only question remains: what is your firm doing to stay ahead of the curve to fully realize the benefits of blockchain technology?