Whether you consider yourself a newcomer to cryptocurrency, an amateur investor, or an expert, it’s always helpful to get a download on the latest perspectives on keeping your crypto assets secure.
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It’s also important to understand that everything in cryptocurrency revolves around keys. When it comes to transacting with cryptocurrency, everyone needs a public key. Public keys are essentially what connect you and your cryptocurrency to the blockchain ledger. Alternatively, private keys are known only to you, and are the tool that you must use to verify or sign transactions involving your cryptocurrency.
Paul Puey is the CEO and founder of Edge, a multi-currency crypto wallet. He elaborates on the nature of blockchain security and the need for these keys, “One of the biggest misconceptions about blockchain technology is the belief that it helps make data secure. In actuality, data on a blockchain is inherently public and visible to everyone. However, the keys used to access a blockchain need to be very secure, as those keys are now money. Therefore, blockchains have not created a new form of security, they have motivated its creation.”
This “cryptographic achievement” as Erik Schmidt, Executive Chairman for Google once called Bitcoin and its underlying technology, helps keep your assets secure, allowing you to use them freely without fear of getting hacked or losing your funds. Another critical thing to keep in mind is that all of these keys are usually lengthy strings of numbers, so it’s essential to have a secure place to keep them, so they don’t get stolen, and so you don’t forget them.
People rely on various types of wallets to store and secure their cryptocurrency. There are a number of options for this, including hardware, paper, desktop, online, and mobile. No matter which option you chose it’s important to make sure it has some key traits to keep your assets secure. Puey shared some of the top features to consider when evaluating cryptocurrency storage options:
First and foremost you have to assess the safety of the storage option you’re considering. In most cases, decentralized options are going to be your best bet. Puey explains, “The problem with centralized security is that it takes everyone’s data and puts it in one place. This puts a massive bullseye on that central location for hackers and attackers to target. It’s a lot like a city or a castle. You might have really thick walls, but you’re still at the top of a hill waving a flag, and all it takes is one person, breaking one brick, to start a chain reaction that allows them to get in. It’s the same with centralized security.”
Wallet options that encrypt data on the user’s side are more secure than those that hold assets in a centralized location. Puey continues, “When it comes to Bitcoin and other cryptocurrencies, we’ve seen this create a huge loss of assets. Any time a wallet is hacked, those funds are lost for good, and there is no crypto version of the FDIC to restore them. So, it’s vital that funds are always secure.” The Mt Gox hack in 2014 is a prime example of how costly security errors can be.
With the diversity of currencies available on the market these days it’s essential to work with wallets that will allow you to quickly exchange your currency in case you have a desire to invest in one that is up and coming, or sell when prices start to get volatile. Puey shares, “We found that our users all around the world were clamoring for a private, secure, open-source, and easy to use multi-asset wallet they could depend on.”
That demand is driven not only by an increase in the volume of cryptocurrencies, but also the increased number of applications in which cryptocurrencies can be used. With the rapid growth of the dApp industry, has come an increased need for flexible, multi-currency storage.
Finally, any storage option you use must meet your needs and feel convenient. Otherwise, you aren’t likely to manage it as frequently as you should. A cryptocurrency wallet is just like your regular wallet: it holds your money and (if you are active in the cryptocurrency space) you will be using it frequently. If you will be using something so often, it’s reasonable to demand that it provide a certain amount of convenience.
Any good wallet should have simple, secure options for authenticating your identity. Puey explains how his company worked toward this goal, “We worked to provide an integration of three core offerings: a hyper-secure and private personal vault, a friendly user interface for blockchain networks and services, and an encrypted single sign-on solution for decentralized applications.” Any wallet you use should have these functions to make it easy for you to use on a regular basis.
When it comes to securing your cryptocurrency, be sure to work with reputable companies, ones that have been recognized as trustworthy by both media experts, and industry influencers. Be sure to vet every option and verify that the company is transparent about their technology, and participating in the community at large.
Interview: MakerDAO CEO Rune Christensen Talks Stablecoins
I recently spoke with MakerDAO CEO Rune Christensen. MakerDAO is the company behind not one, but two, top 2oo-cryptocurrencies by market cap. One of these is Dai, sitting at #107 with a modest market capitalization of $46 million, and the second is Maker (MKR), which currently sits at #29 with a market capitalization of $272 million. At its peak, MKR had a market capitalization of over $1 billion.
The market performance of either of these coins individually would be impressive. The fact that the coins exist together and one governs the other makes it even more impressive. Dai is a stablecoin, intended to behave in a similar fashion to Tether (e.g., pin the value of the coin to a fiat asset, in the case of both Tether and Dai this is the US Dollar). The similarities between Tether and Dai, however, pretty much end there.
What is a Stable Coin?
Very early on in the days of cryptocurrencies, it became evident that bitcoin was going to become a speculative investment, at least until it achieved global adoption. The coin’s limited supply, low volume, and boom and bust cycles made it untenable for use as everyday money.
Enter the stablecoin. These coins can potentially offer all the benefits of blockchain technology: an immutable ledger, smart contracts, decentralization and more without any of the volatility that comes with more traditional cryptocurrencies like bitcoin and ethereum.
The Three Types of Stablecoins
There are three types of stable coins:
The basics: Each unit of this type of coin is backed by a unit of fiat currency. For instance, in the case of Tether every unit of Tether is backed by a US dollar. I can even go to Tether’s website and redeem my Tether for US Dollars.
[Editor’s note: Tether does not operate in all jurisdictions and is not currently accepting any registrations through its main website portal.]
The good: These coins are incredibly easy for consumers to understand. While they are sometimes subject to volatility, especially in cases where the integrity of the currency is being questioned, in theory, the fact that you can always redeem one token for one fiat unit should stabilize the price.
The bad: While we touched on this briefly in our interview, what follows below is a much longer explanation of how fiat currency went from being a reserve currency to it’s current, inflated state.
A Brief History of USD Inflation
The easiest way to explain this type of currency to explain might be the US dollar prior to Richard Nixon’s presidency. At that time, anyone could walk into any bank in America, hand the bank $1 and get 1.67 grams of gold at nine-tenths fine. This was the law and the result of the Gold Standard Act passed at the turn of the 20th century. Then, one day 47 years ago, Richard Nixon decided to take the United States off the “gold standard.” Why it happened and what happened next are key to understanding the issues behind a reserve currency.
The gold standard worked great throughout the first and second world wars. In 1944 with the war coming to an end, representatives from 44 nations met to develop a new monetary system. The system, named “Bretton Woods” after the name of the town in New Hampshire where this meeting would take place, had the goal of devising a monetary system that would “ensure exchange rate stability, prevent competitive devaluations, and ensure economic growth.” The system centered around the US Dollar and required that all international accounts be settled in USD. These dollars could be converted to gold at an exchange rate of $35 per ounce.
The system worked extremely well in the postwar years. Virtually every other economic powerhouse in the world had been destroyed by the war leaving the United States with an unprecedented monopoly on manufacturing and trade. Additionally, the country owned over half the world’s gold, and other countries rapidly consumed American goods. They had no choice, their manufacturing capacity, natural resources, and to some extent their labor forces had been devastated by the war.
What happened next was easy to anticipate: Germany and Japan rebuilt. Both countries had been formidable industrial powerhouses before the war and regained their status in only a few years. The U.S. had issues of its own to contend with: the Vietnam war and aggressive spending had caused huge amounts of inflation and it’s percentage of economic output had dropped by nearly 10%. The system was heavily criticized internationally, with one American economist explaining: “It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one.”
Nonetheless, the system teetered along until the overvaluation became too blatant for foreign leaders to ignore anymore. The U.S. central bank held only $13.2 billion in gold compared to $14 billion in other central banks. Only about 20% of that was redeemable by other countries. French president de Gaulle announced his intention to exchange all of his country’s dollars for gold. This is when the dominoes started to fall: West Germany left the Bretton Woods system and other countries watched as their currency increased almost 8% compared to USD. The overwhelming economic response was panic. Switzerland and France exchanged paper dollars for hundreds of millions of dollars worth of gold.
Rather than leave Bretton Woods, Nixon decided to suspend the convertibility of gold. On national TV in 1971, Richard Nixon announced that the U.S. would leave the gold standard. He then imposed a 10% import tariff and froze wages and prices for the next 3 months to prevent any immediate inflation. He proceeded to comfort the American people by saying “in America, your dollar will be worth just as much tomorrow as it is today.” This, as we now know, was not the case. Over the next 50 years, expansionist monetary policy increased government spending, and the continued recovery and subsequent boom experienced by countries formerly struggling to pick up the pieces of their economies following World War 2 recovered. All of this rendered the dollar at 19% of what it was worth when Nixon made his announcement.
All this brings me to my original point: the problem with reserve currencies. Yes, it may be true that when you by your Tether today you can exchange it for a physical dollar. But it might not always be that way. Tether has thus far refused to undergo a full audit of its books (as promised), and its price has experienced volatility more than once. It even faced criticism from Bloomberg for its trading patterns on certain exchanges.
The basics: Instead of using a fiat to back the currency, crypto is used, typically in an over-collateralized fashion (that is the ratio of the stable coin to crypto is greater than 1:1). The system is then managed by smart contracts that buy and sell the underlying assets to keep the currency at $1.
The good: Transparency is the biggest here. Since all transactions happen on-chain, everyone can inspect the underlying assets.
The bad: Cryptocurrencies are incredibly volatile. Volatility in the underlying asset means in order to maintain a price peg, you need to be extremely over-collateralized.
The basics: Smart contracts are used to maintain the price level by regulating the supply of currency. As the price of the coin goes up, more currency is created to bring the price down. As the price decreases, currency is bought. If the reserve of money runs out, rights to the future issuance of coins are sold to raise funds. In some cases, the system governed through the use of a decentralized autonomous organization (DAO) where users can vote on monetary policy. Users can also lock up coins (to reduce the circulating supply) and earn interest.
The good: The best part of these types of currencies is that they are independent of any other currency. The value of the collateral can’t come spiraling down because there is no collateral.
Pantera Capital CEO: Investors ‘Overreacting’ to ETF Delay, Should Focus on Bullish News
CEO Dan Morehead claimed that crypto markets are reflecting some overreaction from investors recently, in comments to CNBC August 8.
Speaking in an interview on CNBC’s “Fast Money,” Morehead suggested that investors have exaggerated the importance of the U.S. Securities and Exchange Commission (SEC) recent delay on their decision regarding a Bitcoin (BTC) Exchange-Traded Fund (ETF).
As per Morehead, crypto investors should instead focus on more bullish events in the market, such as the announcement of upcoming cryptocurrency project Bakkt by the Intercontinental Exchange (ICE). The ICE, which operates 23 large global exchanges including New York Stock Exchange (NYSE), is set to launch a global ecosystem for digital assets alongside Microsoft and Starbucks.
Morehead stressed that Bakkt is “huge news,” arguing that the upcoming project will have a “very profound impact over the next five or 10 years for the markets.”
As for the recent ETF postponement, Morehead predicted that a Bitcoin ETF approval will take “quite a long time,” pointing at the nascent stage of crypto adoption. As an example, the hedge fund manager cited the fact that the most recent asset that gained approval from the SEC for ETF certification was copper, a metal that “has been on earth for 10,000 years,” commenting:
“The main thing to remember is that bitcoin is very early-stage venture, but has real-time price feed — and that’s a unique thing. People get excited about the price and overreact.”
Morehead also mentioned that while the major cryptocurrency has experienced a negative price trend recently, it is still up around 82 percent year over year, noting that “it’s all perspective.”
On August 8, the U.S. federal securities regulator postponed its decision on the listing and trading of a Bitcoin ETF application from investment firm VanEck and financial services company SolidX to the end of September. The price of Bitcoin dropped on the news, dipping to as low as $6,211 after touching intraweek high of $7,560, according to Cointelegraph’s Bitcoin price index.
Today the crypto markets have bounced back, seeing gains between 1 and 9 percent in across the top twenty coins. Bitcoin is trading just above $6,500 at press time.
JPMorgan CEO Dimon: ‘We’ll Use Blockchain Too Many Areas’
Jamie Dimon, CEO de JPMorgan Chase, el banco de inversión más grande de los EE. UU., Concedió una entrevista para la edición de julio-agosto de la revista Harvard Business Review e hizo algunas declaraciones sobre la tecnología Blockchain.
In an interview with Dimon, JPMorgan Chase stressed that “new forms of payment” came at the forefront of what he saw as a threat today. Dimon, who exemplifies PayPal, Venmo and Alipay in particular, thinks these companies are doing well. He asked Jamie Dimon a few questions about crypto money, but he said “it would be better not to comment on that anymore” and stressed that crypto money “can not be held with gold, or nominal money, supported by law, the police, the court”. Dimon commented that Blockchain technology is ‘real’, and JPMorgan said he would use this technology “too much space”