Since the explosion of cryptocurrency popularity in 2017, cryptocurrency exchanges are also seeing unprecedented increases in growth every year, with old players in the game growing more powerful and newer entrants into the market aiming to get a slice of the market share for themselves.
This has led to the wrath of numerous governments placing stringent regulations on the use and purchase of cryptocurrencies; this regulatory environment has warmed somewhat since and people are now speculating as to whether governments are going to require crypto wallets.
The Rise of Cryptocurrency Wallets And Exchanges
Cryptocurrency exchanges are currently experiencing massive growth and increases in customer base, with swaths of exchanges being set up since the launch of Bitcoin.
This is even after the market-shaking event whereby Mt. Gox, the largest exchange in the world at the time shut down due to a crippling cyberattack where Bitcoin was stolen in 2014. Governments have been forced to take notice of cryptocurrency.
Since these events, dominant players in the game have emerged, with the following exchanges being the largest by trading volume (10/05/2020).
Bybit: $3,402, 331,088.
Of course, the popularity and increasing presence of cryptocurrency exchanges also have a great influence on the number of cryptocurrency wallets that are being registered. This is because to actually effectively trade on an exchange, a wallet is required.
The more successful exchanges become, the more wallets are going to be required. This is reflected in the figures with under 10 Million blockchain wallets registered in 2016 compared to 40 Million in 2019.
Additionally, the development of different types of cryptocurrency wallets, with numerous different players in the industry has led to increases in the prevalence of wallets through market saturation and greater customer choice and differentiation. For example, mobile wallets are great for individuals that are always on the move; whereas a Trezor Wallet is most effective for individuals who need a physical, disconnected device for security.
The blockchain technology market is only expected to increase in size, going from $1.2 Billion in 2018, to an estimated $23.3 Billion in 2023. If this occurs, many more cryptocurrency wallets are going to be required by new users and more trades are going to be made on exchanges by these users as a result of these increases. World governments will be given even more reason to consider cryptocurrencies if this occurs.
As mentioned previously, governments around the world have taken incredibly hostile stances on cryptocurrencies in the past, with multiple countries outlawing them with outright bans. Despite this, countries around the world are starting to take notice of the increasing success and sustained confidence of both digital currencies as a whole, and as a consequence, cryptocurrency wallets. Examples of countries that have attempted to launch cryptocurrencies can be found below.
Even the governments of major world powers have been studying the effectiveness of digital currencies for a number of things, namely Russia that has looked into the possibility of using digital currency to facilitate rapid and cheap transfers of money across state lines and investments, although these plans have been put on ice.
Additionally, with the growing influence and power of cryptocurrencies, there is a new wave of liberal finance that seeks to be free from government control, this hasn’t stopped governments of countries from toying with the idea of creating a centralized digital currency most likely a stable coin, pegged to the national currency.
It is uncertain how the adoption of a Central Bank Digital Currency (CBDC) will fare in nations, with blockchain platforms providing leading-edge competition and promises of greater privacy and autonomy.
Due to the massive increases in cryptocurrency adoption, if governments wish to become involved in cryptocurrency use, or the use of digital currencies it is likely they will need crypto wallets; due to the fact that they are currently an integral part of digital currency infrastructure and due to the fact that non-custodial wallets are safer than centralized storage solutions.
Central Banks around the world are also dragging their feet with CBDC programs, with 85% stating they are unlikely to bring anything to fruition in the near term. This gives the opportunity for wallet platforms and the crypto community to drive light years ahead of similar, centralized government projects, which may further engage governments to use crypto-wallets; to adapt to the more developed system of digital currency management and not to fall behind.
Initially, governments and financial institutions widely disregarded cryptocurrencies and envisioned that they would not last. A few years on and the market has since gone from strength to strength despite causes for concern.
From what has been discussed, it can be seen that more and more individuals are being drawn to the autonomy and freedom of cryptocurrencies; freedom that will not be provided by government CBDC programs.
It is incredibly likely that more and more governments will use digital currency wallets in the future, to reduce currency transfer expenses and the time taken for these transfers and for other utilities. In the event that CBDCs are not taken up successfully, or are not developed in pace with current blockchain solutions, governments may have to bend to the will of the people who will be using proven, safe and autonomous solutions rather than the less developed alternative.
The number of people using cryptocurrency wallets will keep increasing and it would not be surprising to see governments using them in the near future, the rise of wallets will be aided by the increasing popularity and usage of cryptocurrency exchanges.
Exposing any information to an online network creates vulnerabilities that can be exploited by hackers. In this unsure environment, where hacks are starting to be viewed as an increasingly difficult problem, cryptocurrency holders must know how to secure their digital assets
One of the biggest unique selling points of cryptocurrencies, as it stands, is their high-levels of security and their natural resistance to hacking attempts. Despite this reputation for security, institutions that are responsible for handling cryptocurrencies are generally less successful in their efforts to secure their network. This has led to a number of highly-publicized and incredibly damaging hacks being levied against both cryptocurrency exchanges and wallet providers across the world.
In this unsure marketplace, where hacks are starting to be viewed as an increasingly difficult problem, cryptocurrency holders need to be able to take responsibility for their cryptos. This is in addition to the responsibility that the exchanges and wallet providers have to the customer. As a result, it is more important now than ever to ensure that you are fully aware of how to keep your cryptocurrencies safe before you go crazy on various wallets and exchanges.
The Biggest Crypto Wallet Hacks In History
Coincheck is a provider of both cryptocurrency wallet and exchange services. The company was established in Tokyo, Japan during August 2014 by co-founders Yusuke Otsuka and Koichiro Wada. Since its founding, the company has gone from strength to strength, with Coincheck eventually being the subject of an acquisition by Monex Group, for the value of $34 Million.
Despite the relative success of the company, it has not always been smooth sailing for the Japanese exchange. In January 2018, the company was the subject of an attack by malicious actors. The hackers made off with over $500 Million worth of digital tokens, making this not only one of the biggest crypto hacks to date, but also one of the biggest heists to date. Not much information has been provided on how the attackers managed to breach the exchange’s security, although they have confirmed that it was not an inside job.
There is speculation that the exchange was hacked due to their use of “hot-wallets”, which are cryptocurrency wallets that are connected to an external network. These are more vulnerable to hacking than the disconnected cold-wallets.
Binance is one of the most recognizable names in the cryptocurrency sector, regularly being considered as the largest cryptocurrency exchange in terms of the trading volume. The exchange was founded in 2017, by co-founders Yi He and Changpeng Zhao. The fact that Binance has appeared in this article shows that even the biggest players in cryptocurrency can fall victim to a hack.
In May 2019, it was reported that hackers had targeted the multi-national exchange, making off with around 7,000 Bitcoin, which at the time was worth over $40 Million. What was even more concerning, was that the hackers drained the funds from the exchange in a single transaction. The company treated this as a large scale security breach and immediately began investigating the hack.
Upon investigation, it was discovered that the hackers used a variety of methods to collect a large amount of personal information to facilitate the hack. Thankfully, the hack was limited to Binance’s “hot-wallet”, which only holds 2% of the exchange’s Bitcoin holdings. According to Binance, other wallets were not compromised and the damage would be limited through their Secure Asset Fund For Users, which is an emergency insurance fund.
Bitpoint is a Japan-based cryptocurrency exchange, that is owned by the parent company Remixpoint inc. Japan’s tolerance to cryptocurrencies extends to their changes of legislation and to the fact that all Japanese cryptocurrency exchanges need to be registered with the relevant authorities. Due to Bitpoint’s inclusion on this list, it can be concluded that just because an exchange is legal and registered, does not mean it is completely safe.
On the 12th of July 2019, Bitpoint suspended their services after noticing an issue with their payment systems, with the company later releasing a statement, revealing that $32 Million in cryptocurrency had been stolen from the platform. The exchange was able to locate some of the missing funds, although nobody has been brought to any form of justice for the crime.
The reason for the breach was listed as the unauthorized access to private keys of the exchange’s hot wallet. In the wake of the news, the company stock had devalued by 19% and even stopped trading altogether at one stage. This was due to mass sell-offs in the wake of the hack. The exchange later offered to pay the 50,000 affected customers in cryptocurrency to the value of their losses.
How To Protect Your Cryptos:
Keep Your Private Key Offline:
As has been mentioned previously, exposing any information to an online network creates vulnerabilities that can be exploited by hackers; this is also true to your private keys for your crypto wallet. Your private key should be stored offline and kept in a secure location, such as a safe, or some other location which only you are privy to.
Select a Wallet That Has Effective Security Measures:
The reality is, depending on what type of cryptocurrency wallet you use, your information and your keys will be more or less secure. If you are looking for maximum security, then it may be better for you to use a hardware wallet. Hardware wallets are offline devices and as such are invulnerable to attacks by hackers.
Do Not Use Public Wifi:
If you are utilizing a cryptocurrency wallet on your mobile device, then you need to be incredibly careful and selective about the environments in which you go online. If you are using public wifi, your device has a much higher likelihood of being compromised. You should try to limit your internet usage to private, secure networks to protect your cryptocurrencies.
Digital banking is another term that is given to the increased popularity and development of online banking services. Digital banking has been developed and implemented by institutions worldwide in an effort to address some of the major shortcomings of traditional banking systems, such as a lack of customer service, lack of convenience for customers and poor access to certain financial services. Furthermore, the uptick in digital banking has given rise to a different type of banking, namely, cryptocurrency banking which has, in turn, increased the adoption of cryptocurrencies as a form of payment.
The earliest implementation of digital banking was longer ago than many people may initially realize, with the advent of digital banking services such as ATMs for cash and bank cards being issued in the 1950s-1960s. By the 1990s, online banking had slingshotted to major popularity in the developed world due to the rise of the internet.
Why is Digital Banking On The Rise?
One of the ways in which digital banking has changed the banking sector is by increasing the level of convenience to the customer. In fact, 43% of people have stated that they believe convenience and having effective online services go hand in hand. In the United States, customers have ranked which institutions are the best at promoting access to digital services, and they were ranked according to the below image.
In the United Kingdom, there has been a noticeable rise in the number of and the success of “challenger banks”. These are banks that have no physical branches and all interactions with customers are handled digitally, some have 24/7 telephone customer service. The main reasons for these changes are that people in the United Kingdom are looking for quicker, more convenient banking options.
Savings on Infrastructure and Business Costs
One way in which the move towards digitization can positively affect the businesses in the banking sector is the potential for such a move to promote cost-savings as a result of making operational procedures more streamlined. This also allows banking providers to utilize the funds freed up from cost savings to provide better services to customers, such as by reducing fees for customers.
Digitization can also benefit both the business and the customer due to the fact that it allows for simplification of the onboarding process. A real example of where this has been implemented can be seen from US-based Mariner Bank, who have implemented SaaS from Digital Onboarding, to allow their staff to spend less time filling in forms and therefore spend more time on personally serving customers who require assistance.
How Does Digital Banking Relate to Cryptocurrencies?
Cryptocurrencies have cut a disruptive and controversial figure in the world of finance, since their rise to popularity in 2017, and due to the fact that they are digital assets, they are beginning to form an interesting relationship to the current digital banking landscape.
One of the reasons for the slight change of heart in relation to cryptocurrencies has been the gradual relaxing of cryptocurrency regulations in certain states. Previously, bans on cryptocurrency activities were common, which prevented the symbiotic growth between digital banking and cryptocurrencies.
Some of the behemoths of the financial sector are starting to embrace cryptocurrencies and recognize the value that they could bring to their organization. JP Morgan, for example, has created its own digital currency, with the primary objective of decreasing the amount of time it takes for money to be transferred between two parties. Furthermore, the banking giant claims that it will allow them to facilitate transfers over different blockchains, with the company claiming they have always seen the potential in digital currencies.
Digital banking has helped to spawn a new type of bank, the cryptocurrency bank. Whilst a cryptocurrency bank may sound complicated, they are in fact simply institutions that fulfill the same functions as a normal digital bank would, however, there is one key difference. True to their name, these types of banks include cryptocurrency-related services as a part of their repertoire for their customers.
There has even been a huge rise in the number of cryptocurrency ATMs available to customers for use.
How Will This Change Impact Cryptocurrency Banking?
The rise of digital banking has and will continue to have a positive effect on the viability and the utility of cryptocurrency banking, despite the fact that we are still quite far away from mainstream adoption.
In 2020, 153 Million unique Bitcoin wallet addresses are in circulation, with the number of active wallets being around 550,000. Whereas in February 2019, there were 32 Million Bitcoin wallet addresses, which poses an increase of 121 Million wallets since then.
Cryptocurrency banking does also faces intense challenges for the future. In its current state, the cryptocurrency banking system is slightly ill-fitted for purpose, although progress is always being made. Threats from the traditional banking sector and the continuing volatility of the regulatory landscape relating to cryptocurrencies present significant hurdles to widespread adoption. It is strongly believed that cryptocurrency banking can fill one major gap in the traditional and digital banking spheres, which are international money transfers. Transferring money between countries via blockchain massively reduces the associated costs of the transfer and allows for the money to be sent much more quickly than is possible with traditional banks. Both businesses and individuals sending money to their home country for their families stand to benefit greatly from this, as globalization increases the number of international money transfers.
During the very early stages of cryptocurrency popularity in 2016, there were only 8 million different cryptocurrency wallets created. Since cryptocurrencies have become more popular, this number has jumped to 40 million in mid-2019, which is a fivefold increase over a three year period. As cryptocurrencies continue to work their way into the public’s consciousness, the number of cryptocurrency wallets that have been created will naturally exponentially, potentially at an even higher rate than is currently being seen. As the number of cryptocurrency users requiring wallet services has increased, so have the number of wallet providers across the world. Naturally, with so many options available, it can be hard to understand which wallet is the best one to suit your needs as a user. Below, you can find ways to choose the best crypto wallet that suits your individual needs.
You can download and use desktop wallets on your computer, no matter which operating system you use. In terms of security, they are relatively safe as the wallet can only be accessed on your computer, although as your computer is likely to be connected to the internet, there is always a chance that your private keys may be stolen. It is true that when using a desktop wallet, your seed keys may be kept in a non-encrypted format, which can leave you at risk. This occurred in 2017 when users of Jaxx wallet experienced losses of $400,000 due to this issue.
Online wallets are run on a cloud-based system, which makes them incredibly convenient to use as you will be able to access this type of wallet from almost any location, so long as you have an internet connection. Despite this, storing your private keys online in a centralized manner makes your holdings a lot more vulnerable to attack from malicious actors. Online wallets are normally used by a number of cryptocurrency exchanges and thus cryptocurrency exchanges are regularly being hacked, with as little as eight seriously notable hacks occurring in 2019.
Mobile wallets are incredibly similar to desktop wallets, although as the name would suggest, they are built to work on your mobile phone. With mobile devices being a huge part of the modern world, it isn’t surprising that mobile wallets are some of the most convenient on the market at this time. They are also known for having high-quality user-interfaces. Another benefit of mobile wallets is that your keys are directly onto your device, although with some mobile platforms having questionable security, mobile wallets can be prone to glaring security issues. Some mobile wallets even store keys on a cloud system, leaving them even more open to attacks. A 2017 report by Californian security company High-Tech Bridge demonstrated this lack of security with crypto mobile apps, stating that among 30 different cryptocurrency apps with over 100,000 downloads, “93 percent contain at least three medium-risk vulnerabilities and 90 percent contain at least two high-risk issues”.
Hardware wallets are the premium option for individuals that are looking to hold their cryptocurrencies in the long-term, with their enhanced security features. As opposed to software wallets, a hardware wallet will store your private keys on a physical device. A large number of these wallets are designed to keep your cryptos safe, even on a computer that has been infected.
A downside of hardware wallets comes in the form of their prices.
Paper wallets are a type of physical wallet that allows you to store your keys in print format, usually in the form of a QR code. Despite your initial thoughts, paper wallets are an incredibly secure method of storing your cryptocurrencies as to spend your cryptos, you will need to transfer the funds to a software wallet. One of the main, obvious drawbacks of paper wallets is the fact that they can be destroyed, stolen or lost very easily if they are not stored appropriately, which will lead to the overall loss of your holdings.
The majority of cryptocurrency wallets don’t require you to spend any money to use them, although it should be noted that certain wallets such as hardware wallets will require you to make a small investment to purchase them. If you intend to keep a hold of your cryptocurrency for a long period of time, then it is recommended that you invest in a hardware wallet. An example of lower-end pricing for hardware wallets can be found with the Ledger Nano S at $59 and the Trezor One costing as much as $78.
Making sure that nobody can steal your cryptocurrency holdings is one of the most important factors to consider when selecting your cryptocurrency wallet. When you are analyzing different options for your cryptocurrency wallet, you should research their security features and their reputation. To ensure the highest possible level of security for your holdings, you should consider a hardware wallet. Some additional tips to help keep your holdings secure can be found here.
Ease of Access
If ease of access is most important to you, mobile and online wallets are the most suited to your needs. You can get access to them from any location, no matter what device you happen to be using at the time.
Is the Wallet Multicurrency?
If you are going to be storing a number of different cryptocurrencies, then making sure that your choice of wallet can support this is critical. Typically, when you are looking for a wallet like this, you should check user-reviews to ensure that they have a good reputation. If you are looking to store only one coin, check the coin’s website to see if there is a dedicated wallet already. Hardware wallets generally tend to support more cryptocurrencies than other types of wallets.
Given the prevalence of bank accounts in the modern world, and the necessity of having one in first world countries, it would be easy to assume that there are only a small number of people on the planet without a bank account. This assertion would be incorrect, in fact, a large number of people do not have a bank account at all. Considering the huge buzz centered around cryptocurrencies, it is also surprising to see that there are a large number of inactive accounts within the cryptocurrency space.
Inactive Bank Accounts
In 2018, the World Bank released information pertaining to the current climate for global financial inclusion. The provided figures give an unprecedented look into the subject. The data from the World Bank showed that despite the fact that 67% of the world’s population had a bank account in 2017, up from 61% in 2014, growth may be slower than we think. Of the increase in that three year period, 80% of those new accounts are currently inactive. Meaning that they have had no ingoing or outgoing transactions for over a year. When you only apply active accounts to the percentages, the share of people with a bank account increased from 52% to 53%, which is a much smaller improvement. The survey from the World Bank included answers from 150,000 participants.
The number of inactive accounts is of concern to financial institutions because if a user doesn’t consistently utilize their account, they will not be able to attain the benefits that the account provides, furthermore, those accounts also provide minuscule value to the issuers of the accounts. Only inactive accounts with large balances will be able to generate value for the bank and the customer.
Out of all of the different countries surveyed, it was found that the countries with the largest populations, China and India were also the countries with the most financially excluded people. The survey also gave the participants the opportunity to explain their reasons for not having a bank account. The figures show that the main reasons for exclusion are a lack of access to money, the cost of using the services, access to services and a lack of trust in financial institutions. With the World Bank only having one more year left until the deadline for their Universal Finance Access by 2020, they will need to think about the realistic deadline for UFA and how the steps they are going to take to achieve this goal. The World Bank has pledged to aid the inclusion of 1 Billion people, Visa, Mastercard, and GSMA have pledged a collective 1.5 Billion people, along with other institutions also making pledges.
Inactive Crypto Accounts
It is obviously going to take a lot longer for cryptocurrencies to see universal use across the world than it is for bank accounts, however, that does not mean that cryptocurrencies are doing badly with the accounts that they have now. In fact, Bloomberg, using information gained by market research firm Flipside Crypto has stated that an unprecedented number of previously inactive Bitcoin wallets have become active again. Delving further into the figures shows that the number of Bitcoin wallets that have been inactive for a period of 1-6 months had dropped by 40% between March and April 2019. This caused a surge in the price of Bitcoin at the time and was indicative of people warming up to the idea of buying Bitcoin again. One of the biggest concerns with inactive cryptocurrency accounts within the market is those of large cryptocurrency Whales. These are individuals with huge cryptocurrency holdings, with the transfer of said holdings being able to directly influence the market price of Bitcoin. For example, there are currently concerns about a dormant Bitcoin Whale, holding 80,000 Bitcoins. This is worth over $700 Million and if this Whale decides to cash in on their holdings, it could cause a market crash, according to analysts at Whale Alert. People in the market are valid in their concerns about previously inactive Whales, as it was found in December 2018 that $1.5 Billion worth of Bitcoin was transferred from previously dormant cryptocurrency wallets, with a concerning number of these transactions being from the top-20 Bitcoin wallets. For example, one such wallet has been dormant since 2013 and moved over 60,000 Bitcoin, worth $245 Million to an unknown address. The concerns stem from the fact that Whales are also known to crash the market price after selling, so they can purchase more cryptocurrencies at a lower price, holding until they can flood the market again. In fact, the top 3 cryptocurrency wallets that have been dormant for 5 or more years have a collective total of over 150,000 Bitcoins, which is a mind-boggling amount. Outside of the top three, there are a number of users with holdings of over 10,000 Bitcoins. This is a large amount of value stored within inactive wallets. One of the biggest questions that normally surrounds these inactive wallets is the reason for the wallet being inactive in the first place. Due to the high level of anonymity behind cryptocurrencies, we rarely ever learn the reasons for this inactivity, although the most commonly given reasons are, the loss of private keys, the incapacitation of the wallet holder, the holder is continuing to hold for a future sale, or the owner forgot about their holdings. Only time will tell as to whether or not these dormant accounts will “wake up” in the future and sell their holdings, although the marketplace is aware of the potential consequences of such an event occurring.