Having attended last week, a rigorous 3-day workshop on various new technologies, including Blockchain and Bitcoin, this article comes as a perfect reminder of some of the dangers of technology we discussed during the sessions.
Blockchain is the new buzzword in the world of technology and people are still trying to figure out the best use cases in various industries. Blockchain simply means that transaction records reside in a distributed system and thus it removes need for the intermediaries. That’s a huge value proposition! Blockchain also boasts of extreme security and transparency .
One of the real application of Blockchain is Crypto currency – most famously Bitcoin, but also many other types of crypto currency.
During our sessions we discussed that Crypto currency cannot be hacked. They can be “stolen” but not hacked – I hope you get the difference.
Since cypto currencies are “minted” by individual machines, and they reside with the person, on their local machine, they are considered secure.
But there was also a danger that was highlighted during the session. What if the person has some crypto coins on his machine and he never logs into the network? Well, he would not be able to use the coins. It’s like you dumping some physical currency notes in your wallet and keeping it under the mattress forever. Only you lose that money. Others are not affected.
But what if an administrator or an aggregator of the Exchange (of Crypto transactions) switches off the network? Well, they all those who are holding cypto currencies on their own machines would be stranded. They wouldn’t be able to trade.
“But why would the administrator do that?” – retorted the person hosting the session. Why would he strangle his own system (Exchange)? It’s impossible to happen in real world – think rationally, don’t argue just for the sake of being a Devil’s Advocate or a contrarian.
Well, as it turns out, the trainer was WRONG. It’s not whether the person would willingly switch off the network/exchange. What if he dies, suddenly, leaving behind no way to access the network?
Sounds far fetched? That’s actually happened! The news arrived today, within 4 days from the session…
Investors were locked out of $190 million in cryptocurrency assets after the founder of a crypto exchange died without sharing the password to a laptop that contained the business’s records, according to CoinDesk.
Gerald Cotten, co-founder and CEO of QuadrigaCX, died in December due to complications of Crohn’s disease, the company said in a Facebook post last month. QuadrigaCX, which filed for bankruptcy protection in the Supreme Court of Nova Scotia on Jan. 31, was designed to “simplify the process of buying and selling” the bitcoin cryptocurrency, according to a cached version of its website.
QuadrigaCX owes customers around $190 million in cryptocurrency and cash, Jennifer Robertson, Cotten’s widow, said in a sworn affidavit filed last week, according to a copy of the document posted by CoinDesk. Robertson said Cotten held “sole responsibility for handling the funds and coins,” according to the document.
Robertson reportedly doesn’t have business records for QuadrigaCX or its affiliated companies, and she doesn’t know the password or recovery key for Cotten’s encrypted laptop. On its website, QuadrigaCX said it’s been working for weeks to locate and secure the cryptocurrency reserves, but hasn’t succeeded
Check the full article here
This is a good reminder to all of us that we build systems and tools for ourselves; not to become their slaves.
I am sure they would find some way of unlocking the system and returning the millions of crypto assets to the investors.
This is also good in a way because every such crisis makes the system more robust and leads to improvements and safety mechanism.
As for my interest in Crypto/Bitcoin, I go by advice of one of my idols, Charlie Munger. He said:
- Bitcoin is worthless artificial gold (and his view on gold is “Civilized people don’t buy gold”)
- Bitcoin is more expensive rat poison