Cryptocurrencies: Who’s Minding the Store?

Cryptocurrencies: Who’s Minding the Store?

When it comes to the financial topic of digital currencies, economists firmly believe that these financial instruments will be the future of money. However, given the nature of leading cryptocurrencies such as Bitcoin, the future may seem a little bit scary in terms of transparency and management.
There is no question that the world is ready for digital currencies; after all, electronic payments have been around for decades and are very popular among consumers in all countries. The concept of mobile digital wallets is starting to catch on; once the major providers such as Google, Apple and PayPal agree to a specific set of standards, digital wallets are bound to gain wide acceptance. The next logical step would be to switch from paper money to digital currencies, but there are some major security issues in this regard.

Bitcoin Has No Regulation

Consumers know who is in charge of sovereign currencies. For example, the United States dollar is managed by the Federal Reserve System. The availability, issuance and relative value of the American dollars is transparently managed by the Fed with the assistance of the Office of the Comptroller of the Currency. The oversight functions of the Fed with regard to the greenback go far beyond printing money; other duties of this government agency include setting exchange rates, managing the supply of money, setting lending rates of interest, and ensuring that the most powerful currency in the world is not subject to outside manipulation and corrupted practices.

It is important to note that the Federal Reserve acts with a high level of transparency. The meetings of the Board of Governors are public, and details about the money supply are posted online and can be accessed by anyone.

The Mystery of Bitcoin

Bit Coin

When it comes to a decentralized cryptocurrency such as Bitcoin, the only aspect of transparency is provided byt the blockchain, the online registrar of transactions. Other than the blockchain, Bitcoin is a mystery currency by design. No one knows with certainty who founded BitCoin, and there is no mechanism in place for central management. In other words, Bitcoin users and consumers who use this shadowy currency do not know who is minding the store.

Bitcoin is believed to have been developed by a group of crypto-anarchists, individuals who believe that digital encryption should be used to protect information from law enforcement agencies, prosecutors and government actors. Crypto-anarchists develop software solutions that feature encryption technology for the purpose of achieving plausible deniability. The crypto-anarchy movement has developed communications and internet browsing software that allows freedom of information transfer with the benefit of privacy and secrecy.

The crypto-anarchists who developed Bitcoin insisted on certain measures that speak to their philosophy. For this reason, the identity of the person who allegedly founded the Bitcoin framework has never been revealed. That individual is only known as Satoshi Nakamoto, and that is an assumed name. The decentralized aspect of Bitcoin has been troubling because of the plausible deniability aspect; new bitcoins are minted by means of mining, which essentially boils down to using powerful hardware to make the incredibly complex calculations demanded by the public blockchain. Bitcoin mining is done anonymously; for all that is know about this cryptocurrency, organized crime groups could be the miners.

OneCoin, a Safer Alternative to Bitcoin

Not all digital currencies suffer from the pitfalls of Bitcoin. OneCoin is emerging as a sound and safe alternative. OneCoin is a digital currency that operates on a private blockchain that is centrally managed with certain policies in mind.

One particular feature of OneCoin that improves upon the lack of security of Bitcoin is called “Know Your Customer;” this is a protocol that identifies the individuals who transact in this digital currency.

In the end, although Bitcoin has managed to capture many headlines, the risk created by its strange secrecy could one day become its downfall. Safer alternatives such as OneCoin are certainly welcome as the world moves towards digital currencies.

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