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Understanding and managing blockchain protocol risks
Journal of Risk Management in Financial Institutions,
16
(4),
337-353
(2023)
Abstract
This paper addresses the issue of blockchain protocol risks, a foundational category of risks affecting Distributed Ledger Technology (DLT) which underpins digital assets, smart contracts, and decentralised applications. It presents a comprehensive risk management framework developed in collaboration with financial institutions, blockchain development teams and regulators that applies a traditional risk management taxonomy to address certain overlooked blockchain protocol risks. The approach offers a structured way to identify, measure, monitor and report blockchain protocol risks. The paper provides real-world use cases to demonstrate the practicality and implementation of the proposed framework. The findings of this work contribute to the evolving understanding of blockchain protocol risks and provide valuable insights on how these risks affect the adoption of DLT by financial institutions.
Keywords: blockchain risk; risk management; blockchain; distributed ledger technology (DLT); tokenisation; custody; trading; exchanges; decentralisation
The full article is available to subscribers to the journal.
Author's Biography
Alex Nathan is co-founder and Head of Analytics at Metrika. Over the last four years, Alex has been analysing large amounts of data to understand the performance, reliability and operational health of blockchain networks. Alex holds a PhD in industrial engineering from Northwestern University, where he researched applied and methodological aspects of large-scale machine learning.
Dimosthenis Kaponis Dimosthenis is currently Chief Technology Officer (CTO) at Metrika, overseeing the company’s technology vision and strategy. He was previously CTO of Netdata, an infrastructure monitoring company and Beat, a Daimler/BMW subsidiary in the ride hailing space. Starting his professional software engineering career while still in high school and working in parallel to his studies, he dropped out of his PhD to found Cosmical Technology, a boutique software/consulting company, at the age of 25. At Cosmical he co-created two of Greece’s popular smartphone apps of the early 2010s, AthensBook and ThessBook. He holds an M.Eng from Imperial College London.
Saul Lustgarten is the Chief Product Officer at Metrika. Before Metrika, he was Head of Product at Tulip Interfaces, and co-founder of Aprovecha.com and Ringtu. He holds an MBA from MIT Sloan School of Management and a BSc in applied mathematics, economics and philosophy from Brown University.
Citation
Nathan, Alex, Kaponis, Dimosthenis and Lustgarten, Saul (2023, September 1). Understanding and managing blockchain protocol risks. In the Journal of Risk Management in Financial Institutions, Volume 16, Issue 4. https://doi.org/10.69554/HQSE2655.
© Henry Stewart
Publications LLP
Publications LLP