The finance industry is surprisingly laced with very poorly implemented platforms when it comes to security.

For example, most online banking systems succumb to:

• Limited password requirements
  • Ex. Bank of America allows a very small set of special characters in passwords
  • Ex. Citizens Bank does not allow any non-alphanumeric characters in passwords !
• Lack of multi-factor authentication
  • Although some platforms have phone verification (via text/call), many platforms lack general MFA systems (ex. entering a numeric sequence shown in an authenticator application)
• Lack of identity verification for ACH transfers
  • Surprisingly, it is possible under certain scenarios where people can withdrawal funds from bank accounts with just a routing and account number

Therefore, it is advantageous for people to distribute their funds across multiple bank accounts to reduce risk of total loss.

Q: Don’t banks have insurance for money?

A: Many banks will be FDIC certified and may insure funds up to certain amounts (ex. $250,000). Even if funds are insured, bank patrons who are victims of theft may have to deal with lengthy investigations to retain their lost funds.

One strategy for distributing funds is to connect bank accounts so that certain accounts act as hubs and certain accounts act as nodes.

<aside> 💡 People can protect their money by distributing their funds across hub and node bank accounts

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The node accounts act as points that restrict and potential failures caused by intrusions/thefts/etc. For example, in the above diagram, Node A, acts as an intermediate point between Hub A and Random A; where Random A can be any type of account such as a crypto exchange. If the Random A account is compromised, and if the account is linked to the Node A account (ex. via account and routing number), then intruders can in theory steal funds from the intermediate Node A account. However, in this case, funds should remain across any other accounts in the set up.

The hub account simply acts as a connection point between nodes. For the above example, one may receive money from their employer that is directly deposited into the Hub A account. Immediately, the owner of the Hub A account can take the deposited funds and distribute them across the node accounts.