“Bitcoin is amazing”; you probably heard that enough on crypto Twitter and especially in the previous parts of this series. Missed any? Catch up here, here and here.
I n three different publications, we discussed Bitcoin and everything good about it in contrast to contemporary banking and general financial systems.
Bitcoin easily fits into several discussions. A solution to an array of political, financial, and general lifestyle problems. Bitcoin exposes the current system and challenges it with viable alternatives. These alternatives have been shown to work even better and give a glimpse of next-generation technology.
Generality, security…bitcoin flaunts countless and exceptional features that put it at the helm of financial and political revolutions. Being adopted by a whole nation as legal tender, these abilities are for the first time put to the test on a large scale.
A couple of years passed and Salvadorians are already counting their blessing. A testimony poised to outlive them. With bitcoin prices soaring over the past few weeks, it’s easy to scream ‘love’ for the digital store of value. Bitcoin’s real beauty is, however, beyond profit and loss statements. But despite these advantages, it is in fact not a perfect system.
The blockchain is an immutable store of data, manipulating the stored data in any blockchain requires some rigorous procedures that don’t even guarantee access to the data stored in the blockchain. This makes it one of the most secure systems around. With Bitcoin, you are your own bank. But making you your own bank comes with certain responsibilities…especially when it is built on a rigid technology like the blockchain.
Loss of wallet keys or loss of funds via scams or accident might as well mean an ‘irrecoverable loss’ as there’s hardly a way to recover funds in any of these cases. The aftermath of most scams, loss of keys, and loss of Bitcoin through an accident is a complete loss of funds and only in a few cases are victims lucky enough to recover their stolen or lost bitcoins.
Handling bitcoin accidents is a very complicated issue as recovering stolen funds also entails accessing the wallets of the perpetrators, which is impossible by the standards of blockchain technology. Recovering personal wallets without private keys or seed phrases is completely impossible.
Bitcoin’s first flaw as money is its rigid security system; while this has its advantages, being unable to recover lost funds in case of accident or (even) death of the original owner is a reality users will have to embrace. Fixing this will only mean introducing some centralization and reducing wallet security.
Blockchain is a complex technology, despite cryptocurrency wallets being developed to simplify users’ comprehension; performing cryptocurrency transactions is still a complex process relative to using contemporary financial systems and institutions like banks.
Coupled with the already mentioned difficulty in recovering lost bitcoins, the pressure builds on users. ‘A novel complex financial technology without sufficient fund recovery strategy’; skeptics can easily fix Bitcoin’s biggest issues in one sentence and still make enough sense.
Long wallet addresses with no username verification; mixing up Bitcoin addresses or missing a few vital details is as easy as it gets. Pascal blockchain fixed this issue by introducing simple wallet addresses with checksums and username functionality to simplify using the blockchain for financial payments. This is a good fix, however, the Bitcoin blockchain works very differently. Barcode is a good option, but this is not always available.
There are no perfect systems; albeit being better than our current systems, bitcoin’s technology has its own loopholes that can be exploited and several flaws that users must take note of as it continues to conquer the world.