Business Technology

Are cryptocurrencies really the more secure option?

8 min read

28 February 2018

Most industries seem reluctant to fully embrace cryptocurrencies until they get some real momentum behind them but it’s only through being more widely accepted that this momentum will be generated.

It seems hard to believe it, but even a year ago cryptocurrencies were so far from being in the mainstream that if you stopped someone in the street and asked them about them they would probably have stared blankly at you and quietly edged away.

Now everyone seems to be an expert on them, with definite opinions about whether the Bitcoin bubble is about to burst and even whether cryptocurrencies will disappear altogether, just like the dot.com boom of the 90’s.

It’s not all that surprising, given the amount of media coverage that they’ve been receiving over the last few months. Once people start hearing about something that’s started appreciating wildly in value, like Bitcoin, Ethereum and XRP have recently, they start to get a bit more interested.

Then, when the same cryptocurrencies start hitting the headlines for being even more volatile than some anticipated (and others predicted) their profile heads even higher.

The wrong kind of coverage

In more recent times they’ve been getting a distinctly bad press, ranging from heads of major banks stating that investing in Bitcoin is no better than gambling to the recent story from the UK of the malicious software, Coinhive, infecting thousands of websites for organisations including the NHS and several of the country’s local councils.

This has found its way in via script inserted into software called Browsealoud, which helps blind and partially-sighted people use the internet. Once installed on a computer, it hijacks the user’s processing power to mine the open-source currency Monero.

Naturally, the more these kinds of stories appear in the media, the greater effect it’s going to have on undermining people’s confidence in the security of cryptocurrencies, whether or not this is really justified.

Catch 22

Opinions are divided as to how to best address the level of scepticism felt by many about cryptocurrencies and to put some of the myths about them to bed for good.

This is especially important as, until this is achieved, it could well stand in the way of Bitcoin and others being regarded as legitimate currencies rather than either interesting projects for developers or get-rich-quick investments that could disappear in a puff of smoke.

It certainly seems like something of a Catch 22 at the moment. Most industries seem reluctant to fully embrace cryptocurrencies until they get some real momentum behind them but it’s only through being more widely accepted that this momentum will be generated.

It could also be that people are losing sight of the fact that cryptocurrencies and fiat currencies share at least as much in common with each other as the differences that they have, and possibly that cryptocurrencies could even become the even more secure option.

Crypto v Fiat

In fact, when you consider it, the main difference between the two is simply the lack of a centralised control for the cryptocurrencies compared with the government or state control that oversees a country’s fiat currency.

This wouldn’t have been the case back in the days of the Gold Standard when every dollar had to be backed by an equivalent measure of gold, but this was abandoned back in 1971.

With this in mind it starts to change the way that we should think about all currencies, not just dollars. As everyone from philosophers to economists might tell you, money only has the value that we decide to attribute to it.

A dollar bill is just a piece of paper that can be exchanged for a set amount of goods or services. It might as well be a shoe, an apple or, most relevantly, a unit of cryptocurrencies.

It’s also interesting to look at the role that banks play in the overall scheme of things. We are in the habit of seeing them as all-powerful financial authorities when all they really do is play the role of a ledger –  keeping tabs of the money we have and the amounts we spend or receive, exactly in the same way the blockchain does. Arguably, the latter manages this with a greater level of transactional security.

We also need to look at occasions when fiat currencies have proved to be all too volatile and vulnerable in the past. The crazy inflation rates of countries like Zimbabwe and Venezuela, and the catastrophic collapse of the Icelandic economy in 2008, show that even national currencies are a very long way from being the perfect financial cornerstones for a country.

Going all in with poker

Of course, what cryptocurrencies really need is for a high profile industry to show its faith in them and, to this end, many eyes are on online casinos in general and online poker sites in particular, as a likely candidate.

Estimates vary but it’s thought that around 40m people worldwide may play poker with a fair proportion of these also playing online. If they were given the chance to use cryptocurrencies, it could soon catch on with many who would then feel more comfortable that this would be a secure way to pay.

Some people even believe that Bitcoin could be the future of online poker, thanks to its anonymity, low transaction fees and comparative speed of transactions. And with other cryptocurrencies constantly emerging that perform better than Bitcoin in all of these areas, it could be that it is one of these that first captures the attention of the players and online poker companies alike.

There may be one potential hurdle to cross which concerns anonymity. Online poker sites do need to have certain information about players including name, age and email address and those attracted by the secretive nature of the currency might resist for this reason.

However, there are a growing number of sites that are already welcoming many different forms of cryptocurrency, so this is obviously not an issue for them.

It does remain to be seen how quickly, or whether, cryptocurrencies can win the trust of people as a method of payment that really is as secure as traditional currencies. But, there are certainly reasons to feel cautiously optimistic that, this time next year, it’s going to be a very different picture.