The self-custodial model of cryptocurrencies, while radical and enticing, has proved to be disastrous for people who don’t take the time to understand the nuances of the process. In an interview with CNBC, August 18, 2019, Coinbase Chief Information Security Officer (CISO), Phillip Martin, discusses the challenges to securely storing cryptocurrency.
Educating New Customers
Breaking down the rudimentary aspects of cryptocurrency security is extremely difficult, even to those who work in the financial industry.
In the banking system, encryption is limited to two uses: securing personal data of customers and ensuring there are no leaks from the bank’s website. In contrast, cryptocurrencies utilize complex cryptography in every stage of their movement, even when they are held idle.
The consequences of losing your private keys are far more dire than some amount of personal data leaking. Unlike centralized systems, decentralized protocols do not have a backdoor that allows an all-powerful entity to claim keys; once you lose your keys, you’ve lost your funds.
Adhering to regulations involving KYC and AML assures new investors that there is a high degree of integrity in this space and that it isn’t just used for illicit activities. Many customers are also waking up to the economic reality that cryptocurrencies – while pseudonymous – are incredibly transparent, unlike cash notes with have no scope for traceability.
Martin, in stark contrast to his industry peers, believes the biggest hindrance for adoption is that the American financial system is quite efficient and easy to use. He further adds that convincing customers to move from these easy to use services to self secured cryptocurrency may be a goliath task.
Cross-Border Utility Still the Killer Feature
Bitcoin’s ability to seamlessly transfer value from one end of the Earth to another is by far its most useful value proposition. Connecting to the Bitcoin network with a full node just requires a user to download the client and the blockchain history.
Martin believes the utility of cryptocurrencies to send money to developing nations where there are no Western Union/MoneyGram services, or when this service is too cost-intensive to be reasonable is a supreme feature of global decentralization.