Since early 2016, bitcoin has been gaining mainstream acceptance and adoption by consumers, financial service providers, institutional investors, and large-scale conglomerates. Despite this, many analysts and media companies continue to emphasize that the cryptocurrency will likely not have an easy road ahead. As it turns out, there are equal or greater risks inherent in traditional banking that the mainstream media often chooses not to report.
Bitcoin is Better than Fiat
In an attempt to defame bitcoin, many media outlets have peddled horrific stories about the network including its usage on dark web marketplaces, hacking incidents involving centralized bitcoin exchanges, and the recent hard fork of Bitcoin Cash. They want you to think that bitcoin is unsafe because of its security challenges and price volatility. What they fail to mention is that fiat currencies have their own sets of security risks and volatility, worse even than Bitcoin.
The hacking incidents associated with centralized bitcoin exchanges including Bitfinex and Bithumb pale in comparison to the amount of damage resulting from poor security measures of current banking systems. On that note, a recent report suggests that the client data of 25 percent of U.K.-based banks have been sold and distributed on the dark web.
The Sun, a publication based in London, shared this infograph:
In an interview, Emma Mills, Chief Operating Officer of cybersecurity firm C6, emphasized that the financial and personal information of over 11 million consumers and bank users are currently being traded on the dark web. That is over 25 percent of bank users and consumers in the U.K.
Mills detailed service providers in the IT industry that allow bank users to verify whether their financial data has been compromised by hackers or traded on the dark web. However, once exposed to the dark web, there is little ability to protect victims’ financial data.
“It’s a really good indicator, but it’s a bit after the horse has bolted. You wouldn’t leave your purse on a park bench or a bus without being fearful that you would lose money. People don’t seem to have that mindset. It’s actually more important to protect themselves online and be careful about what they post,” Mills explained.
In bitcoin, there are two types of platforms: custodial and noncustodial. Custodial bitcoin platforms include centralized bitcoin exchanges and trading platforms that control the private keys of users. In custodial platforms, users do not have direct control over their funds, and as such are under risk of account closure or fund theft. On non-custodial platforms, users have absolute control over their funds. Thus, even if non-custodial wallet platforms such as Blockchain, Breadwallet and Trezor were to be hacked, user funds are safe as private keys would not be exposed to the hackers.
Bitcoin has set a positive precedent for the entire technology and finance industries. Within bitcoin, non-custodial platforms are on the rise, but the same is not true within the conventional finance industry. The vast majority of service providers rely on centralized platforms that can impose serious security threats for users.