Luke Descryptive Bitcoin Transaction with Wallets.
It all started with Satoshi Nakamoto’s now historic paper Bitcoin: A Peer-to-Peer Electronic Cash System from 31 October 2008, with its proposal for “a solution to the double-spending problem using a peer-to-peer distributed timestampet server to generate computational proof of the chronological order of transactions. The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker…”
It is almost certainly a coincidence that the paper was published in 2008, the year that the global financial crisis hit home, considered by many economists to have been the worst financial crisis since the Great Depression of the 1930s.
And thus, at the tail end of the Global Financial crisis, was born the greatest challenge to the international banking system since the Bretton Woods Agreement in 1944. A brand new computational-based system that promised to allow anyone anywhere securely to send money to anyone anywhere else, without going thru one and probably several banks or trading systems. A technology that bypassed the banks and left the bankers in pinstripes on Wall Street, the City of London or the Forbidden City with … yes with what to do?
The press cuttings tell the story: San Francisco-based Ripple and MoneyGram join forces to test XRP Currency Transfers in a direct threat against SWIFT, and another San Francisco-based powerhouse cryptocurrency exhange Coinbase, booked $1 billion in revenue last year, not to speak of Bitcoin futures begin trading on Chicago Mercantile Exchange, and Wall Street Behemoth Goldman Sachs Is About to Start Trading Bitcoin
Even after the cryptocurrency retrenchent at the end of 2017, the Bitcoin technology is not going away. And to some conservative bankers the threat is real and it is continual: Deutsche Bank has issued a market briefing for 2018. The document, created by Chief International Economist Torsten Slok, lists 30 possible threats that could disrupt global markets next year. Alongside entries like “North Korea” and “Brexit”, is bitcoin. Its inclusion shows the extent to which the banking sector is eyeing the revitalized digital currency. While some institutional investors see bitcoin as an opportunity, many more consider it a threat.
The banks feel under siege and it is perhaps to be expected that the Nordic bank Nordea now forbids its employees to trade with Bitcoin.
But the Bitcoin model still has a massive hole in it, a hole that you can drive a massive number of self-driving trucks thru. And that is just one reason why the banks almost certainly will survive for a very long time. And that is the question of where to keep your cryptocurrencies. You can’t keep them in an Exchange like Coinbase or Kraken, because hackers can get to them over the web. But there are safer alternatives. Lily Hay Newman writes in Wired: How to Keep Your Bitcoin Safe and Secure
A key step to protecting your cryptocurrency is to store anything of significant value in a hardware wallet — a physical device, like a USB drive, that stores your private keys and currency locally, and isn’t connected to the internet.
Well yes kind of. But where do you keep your hardware wallet? Well…. There really is still only one secure place to store your hardware wallet(s).
As Business Insider writes: … the Winklevoss twins cut up the key to their $1.3 billion bitcoin fortune and keep each piece in different bank vaults
Business Insiders adds: “They cut up printouts of their private keys into pieces and then distributed them in envelopes to safe deposit boxes around the country, so if one envelope were stolen the thief would not have the entire key.”
And that is indeed the only perfectly safe place to put your hardware wallets with their bitcoins, in an old-fashioned bank with no connection to the Internet.
It is inevitable that the crypto community will ultimately invent their own cloud-based secure storage to rival that of the banks, maybe through cloud-based services such as the IBM Blockchain Platform with its High-Security Infrastructure (LinuxOne Emperor) option.
But we are not there yet, and in the meantime, thanks to their safe deposit boxes, the banks are part of the crypto movement. It is even possible that for storage to be absolutely secure it really has to be off the Internet for considerable time into the future.
But there is also another angle to the rivalry between the crypto community and the banks. Because nothing prevents the banks from adopting Satoshi Nakamotos Bitcoin and Blockchain-technologies for their own purposes.
And indeed that seems already to be the case, as Jemima Kelly writes on Reuters: Banks adopting blockchain ‘dramatically faster’ than expected: IBM
Banks and other financial institutions are adopting blockchain technology “dramatically faster” than initially expected, with 15 percent of top global banks intending to roll out full-scale, commercial blockchain products in 2017, IBM said on Wednesday. The technology company said 65 percent of banks expected to have blockchain projects in production in three years’ time, with larger banks — those with more than 100,000 employees — leading the charge.
How much will be left of the original vision that Satoshi Nakamoto had in 2008 remains to be seen if the banks adopt the crypto technology without perhaps also adopting the vision. Time will tell.