Exercise: spot the risk

Time to play spot the risk. Below is a simple workflow a firm might use to send a client’s tokens to another account. Walk through it one step at a time, the way you did with the trip to California. For each step, write down what could go wrong, one preventive control that would stop it, and one detective control that would catch it. There’s no single right answer, only better and worse trade-offs between safety, speed and cost.

1. A client emails asking the firm to send 100 tokens to an address.
2. An employee types the address and the amount into the firm’s system.
3. A second employee approves the transfer.
4. The firm signs the transaction with its secret key and sends it to the blockchain.
5. The employee tells the client the transfer is done.

See sample answers

• Step 1: the email might be fake, sent by someone pretending to be the client. Preventive: call the client on the number already on file to confirm. Detective: send the client an automatic notice of every request made in their name.
• Step 2: the employee might paste the wrong address, and the transfer can’t be undone. Preventive: only allow transfers to addresses the client approved in advance, or send a small test amount first. Detective: check the transaction on the blockchain right after it’s sent.
• Step 3: the approver might click yes without really checking. Preventive: show the approver the original request next to what was entered, so they must compare them. Detective: review a sample of approvals each month.
• Step 4: the key might be stolen or lost. Preventive: split control of the key so no single person can use it alone. Detective: get an alert for any transaction the firm didn’t expect.
• Step 5: the client might be told it’s done before the blockchain confirms it. Preventive: only notify the client after the blockchain confirms the transfer. Detective: compare client balances with the blockchain every day.