Chris Pace, technology advocate, Coincover
“Is crypto safe?” We hear that question time and again, right after, “Isn’t it a scam though?” and “But I heard about this guy …”
Some individuals – those who aren’t deterred by damning headlines and well-publicized hacks – are willing to take the risk when the rewards could be so high. But for the majority who have yet to take the plunge, security is at the forefront of their minds, and it’s becoming clearer with every passing report that this is the biggest barrier to mainstream adoption. So, if the power of the blockchain has any hope of reaching the masses, individuals and companies alike must believe that what they’re doing with their money and their clients’ money is safe.
Expectation vs. reality
Eye-wateringly large crypto hacks and thefts make great headlines. But the biggest problem that leads to crypto loss is the fact that individuals and companies must protect their own digital assets and the way in which they access them. Of course, this is one of the greatest benefits of cryptocurrency, as it goes hand in hand with decentralization and having full autonomy over your assets – but it’s also the root cause of many issues. Ultimately, this lack of a safety net is one of the key reasons so many are hesitant about entering this world in the first place.
For customers of traditional banks and credit card companies, this isn’t a concern; they trust that it’s the service provider’s job to keep their money, their passwords and their personal identifiable information safe. Sure, this trust isn’t always warranted, but over the many centuries that TradFi has been around, customers have come to expect a level of security offered by the institutions that hold their assets. All the customer has to do is ensure they don’t share their four-digit PIN or reuse their password.
But when it comes to crypto, there’s a fundamental misunderstanding around who is responsible for ensuring the safety of digital assets. The expectation is that exchanges and wallet providers will be able to prevent fraudulent transactions or hacks, or recover lost private keys – but the reality is quite different. And regulators are starting to wake up to the risk this lack of understanding brings to the consumer.
We must address this if we’re ever to bring the power of blockchain into the mainstream. After all, writing down passwords and putting them in a desk drawer is no way to change the world’s financial system.
Closing the gap – while holding onto what makes crypto great
Investors want to be assured that if they get locked out of their wallets, they can get back in. Businesses want to know if a transaction looks fraudulent, it will be stopped. And regulators want to know that if things go south, consumers will be protected.
We’ve seen a significant uptick in investors and institutions looking for crypto insurance, believing it to be a panacea of security they can control and that will settle their worried minds. In such a fledgling, misunderstood space, it feels like a simple solution to a complex problem: iIf there’s a risk that your asset will be stolen or lost, put insurance in place so you can recover it. And for a very limited few, it’s an option. But crypto insurance – if you can even get it – is expensive and ultimately it does nothing to prevent theft or loss in the first place.
You know the saying “prevention is better than cure”? That’s what we’re talking about here. You wouldn’t leave your front door unlocked because you have home insurance – so why do that with your digital assets?
Proactive prevention – and a credible cure
We’ve covered two of the main issues that hold cryptocurrency back from mass adoption: the expectation that exchanges and wallets should be providing security, and the lack of awareness that there is a way to protect your or your clients’ crypto. So, what’s the solution?
We say it’s putting the focus on prevention, so end users get the best possible security while limiting the risk exposure of the businesses that enable them to participate in the blockchain. There should be two elements to this: theft prevention and disaster recovery. Right now, Coincover is probably the only company in the industry that provides this level of security, by monitoring transactions to prevent theft, and by offering a non-custodial end-to-end encrypted vault for ultra-secure storage and recovery of private keys. Plus, their technology has been insured at Lloyd’s of London, so they could help investors to recover any preventable losses due to theft or hacking. It’s the full gamut of crypto protection – and it enables businesses to significantly reduce their risk.
To take crypto to the wider world, the pioneers of the industry must make a concerted and deliberate effort to ensure security and trust is at the center of everything they’re doing. Pioneering crypto investors and firms might be comfortable with the security risks that arise from current practices, but the vast majority of the crypto-curious are not. It’s time we looked at the growth of crypto from their point of view and radically upgrade the security practices of the entire space.