Op-Ed: We Need Crypto Security Before Simplicity

2409507 - bank vault door showing safety and strength of the facility


In recent years, cryptocurrencies have become almost ubiquitous in the mainstream media. Many media outlets now have reporters or entire sections of their websites devoted to covering digital currency, the blockchain, and other FinTech innovations. Despite that increased attention, however, those digital currencies continue to be difficult to use and hard to access for most average citizens – and that’s a problem.

In fact, this is proving to be one of the biggest obstacles to gaining mass acceptance and adoption of digital currency by the public. There are several reasons for this obstacle, of course – most notably, that there is no straightforward, frictionless bridge connecting digital currency to the world of finance and commerce. Where those connections for exist, they tend to involve multiple third parties that can get in the way between you and your capital.

Of course, there’s another concern that needs to be addressed as well: security. Yes, you want a monetary system that is easy to access, understand, and use. But you also need a system that keeps your money secure. Without that security, it doesn’t matter how simple and accessible your money may be. Unfortunately, many would-be crypto users remain leery of the technology’s underlying security, and that deters them from exploring digital currency’s benefits.

Sadly, those concerns are not always without merit.

In recent years, we have been witness to a host of sensationalist, crypto-related stories in the media about hacked exchanges, insider fraud, and just plain sloppy code. Notable among these cases are names like Mt. Gox (850k Bitcoins, 2014), bitfinex (120k Bitcoins, 2016), the Mintpal / Moola fraud (3700k Bitcoins), and serious vulnerabilities in the multi-sig parity wallet that the developers were aware of but failed to remedy (locking up around US $300m worth of crypto assets that remain frozen to this day). There’s a lot that can go wrong.

Obviously, security is essential to the effective use of crypto. Effective and consistent security creates trust – and trust is absolutely essential to achieving widespread adoption of this powerful technology. Various crypto groups have now acknowledged the need for better security. The world’s largest alt-coin exchange, Binance, for example, now offers a bounty the equivalent of US $10m to help prevent hacks and catch hackers. Web-accessible crypto vaults like Xapo, Coinbase and DNotes function like online virtual fortresses, keeping your crypto safe in cold storage in an offline computer, giving you ample time to detect unauthorized activity in your accounts.

If you’re a novice crypto-user, it’s important to be cautious about where you put your funds, particularly when it involves the use of third party custodial accounts that are able to access those funds the way banks can. This is the prime vulnerability exploited by hackers to steal crypto. The alternative and secure option includes third party providers that offer secure accounts that the providers cannot access, like a safe deposit box where the user has the only key.

Three things are essential to the success of cryptocurrency for ordinary users: simplicity, confidence and security. These are the three cornerstones of customer confidence and accessibility. Cryptocurrency will remain largely theoretical in real world terms without public-friendly interfaces, well-written software, and robust testing and verification procedures. Simplicity and confidence, however, won’t materialize unless the security is established first. The only thing worse than hard-to-use software is losing everything to some unscrupulous hacker.

The reality is that robust security is needed to prevent potentially loyal digital currency users from being exposed to sloppy software and the malevolent hackers who seek to exploit every possible vulnerability. That increased security can help to foster the confidence needed for widespread acceptance and adoption of digital currency.

So, yes – simplicity and accessibility are important for mass adoption of any new technology. But security is even more important. Without that security, digital currency’s true promise will never be realized. With it, mass awareness, acceptance, and adoption of digital currency is all but inevitable.

Author: Timothy Goggin

Timothy Goggin is an economic analyst with an interest in the application of moral philosophy and decentralized systems. He studied economics at the Business School at Victoria University of Wellington, New Zealand. His area of research is the consequential and moral dimensions of implementing digital currencies and the resulting synergies for consumers in the trading environment.

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