It has been 13 years since Bitcoin was invented, and the cryptocurrency industry has attracted huge sums of investment money. And yet, this amazing technology still hasn’t achieved the mass adoption it was designed for. Why is this, and what needs to be changed to make this happen?
To put it simply, the reason some people are reluctant to use cryptocurrency is exactly the same reason it is so attractive to others – it puts your money and the responsibility for your money entirely in your hands. Ownership of decentralized assets is defined by holding the relevant private key, and nothing else. In other words, if you lose your password, your assets will be “lost”.
By extension, sending assets to the wrong place (which is a very easy mistake to make) has the same effect: you are no longer in possession of the key to those assets, so there is no way to get them back. . Blockchain research firm Chainalysis has calculated that 20% of all bitcoin is lost. It is billions of dollars of wasted money. Try to imagine what it feels like to hold a fortune and not be able to touch or use it, ever – it’s frustrating to say the least.
It has become clear that the absence of a central authority ensuring the protection of assets frightens the general public. As a result, the most popular crypto companies were those that centralized the crypto experience with custodial solutions. By ceding custody of their assets, users are given some sort of insurance policy for their mistakes – but centralized solutions are a constant target for hackers. Examples abound: $ 8.75 million stolen from Mt. Gox in 2011, $ 534 million stolen from CoinCheck in 2018, $ 281 million stolen from KuCoin in 2020… the list goes on.
Additionally, these companies have fiat-style KYC (Know Your Customer) requirements that run counter to the goal of decentralized currency, providing data that regulators and governments can use to tax earnings, while creating another security risk. For example, in 2019, hackers stole from one of the largest centralized exchanges in the world, Binance, a mine of two-factor credentials (and $ 40 million in cryptocurrency).
A counter-response has developed in recent years, and it’s called “DeFi”, or decentralized finance. DeFi creates a financial infrastructure that provides the security and convenience of fiat finance, but without forcing the user to relinquish custody of their money. DeFi operators use “smart contracts”, which are mechanisms that perform operations according to computer code. Smart contracts do not require human oversight, cannot be fooled, and are open source. This means that they are completely transparent for review and audit. This contrasts sharply with the opaque operations of traditional financial institutions and custodial crypto exchanges and wallets.
In my opinion, there are three main issues that need to be addressed before the public embraces cryptocurrency en masse. These are the ease of sending a transfer to the wrong place, the lack of non-custodial safeguards, and the loss of assets due to unexpected death. This latter problem will only get worse over the years; there are already a lot of stories of crypto holders who died without making arrangements. Their assets are doomed to remain seated, visible to those close to them but forever inaccessible.
The good news is that solutions to all three of these problems have emerged and are rapidly gaining ground. That’s the beauty of the smart contract: you can design them to do anything. For example, they can be used to password protect and even “roll back” transactions, or be programmed to perform operations such as access rights offsets and multiple automatic transfers when inactive (depending on user requirements). preset timers).
Satoshi Nakamoto, the pseudonymous inventor of Bitcoin, believed peer-to-peer money was going to change the world for the better, and I certainly agree. It makes the economy fairer and gives power (and economic opportunities) back to the people, to whom it belongs. The adoption of blockchain technology has encountered a hurdle due to the lack of decentralized security mechanisms. The way to overcome this is to create services that make crypto management as easy and secure as online banking – and now that such solutions exist, it is only a matter of time before the vision of Satoshi does become a reality.
(Asaf Naim is the CEO and co-founder of Kirobo, which has a suite of tools to make cryptocurrency management safe and simple)