Cryptocurrency has come a long way since its 2008 inception with Bitcoin when so little was known about the asset. Since then, substantial evidence has emerged that the global economy is indeed turning toward a more digital ecosystem, as we see fiat currency, perhaps, standing on its final leg and sweeping progress toward a paperless society.
As cryptocurrency finds increased popularity and wider public acceptance, what are the defining elements that ensure public trust in it as a new financial instrument? To begin with, crypto is unique because you are ultimately the keeper of your investment. Instead of being stowed away in some bank, crypto is held on a public ledger called the blockchain that maintains your anonymity through encryption. Below are three key characteristics that ultimately inspire investor trust in holding the asset over the long term.
Because there is a specific account of every transaction on the blockchain, crypto is fundamentally resistant to counterfeit reproduction. Blockchain technology has enabled an advanced record-keeping system to ensure that every transaction is legitimate. There’s no question that when you hold your crypto, not only is it authentic and exclusively owned by you, and you alone, it cannot be seized by any government agency.
Further, the accuracy and specificity of the blockchain ledger help shield against problems of identity theft. Unlike your plastic credit card, all account balances are verified and every transaction is hyper-examined to assure that you are the exclusive holding and spender of the currency. This is done via the transaction blockchain which logs every transaction through encryption and smart contracts. This makes fraud and hacking over the blockchain essentially impossible.
The third reason is that blockchain technology allows for instantaneous settlement. Consider the last time you made an international wire transfer or any bank transfer at all. It probably entailed several steps, perhaps including the participation of an intermediary from your bank, and the cost to complete that transaction couldn’t have been cheap. The blockchain does away with all those problems with its ease of use. All you need is a smart device and internet connection to achieve the same results as an expensive and cumbersome bank wire.
A recent article on how to buy cryptocurrency by SoFi mentions that “Bitcoin is sent and received using a digital bitcoin wallet, which you download onto your computer or mobile device.” And according to the experts at So Fi, “There are a wide variety of wallets available on the app market.” Crypto, however, is not immune to hacking and theft. The security of assets is ultimately dependent upon the steps you take to secure your digital wallet that stores your crypto.
Trust in cryptocurrency is owed to several proven results of advanced ledger technology discoverable in the blockchain. While, undoubtedly, security threats to maintaining your crypto holdings still exist, the responsibility for mitigating those risks has been shifted from the bank to you, the crypto investor, which is why properly securing your crypto on and off-line wallets remains fundamental.