Published on: 2015-01-21T19:44:35+00:00
Bitcoin is facing challenges in finding a suitable platform for mainstream users who are not tech-savvy. The current options of DIY security and privacy or reliance on third-party services are not efficient. Traditional banks have an advantage over third-party services as regulations and entry costs make it difficult to create a bank, ensuring minimum security levels for end users. In contrast, two programmers can create a Bitcoin wallet/platform without regulation or entry costs, posing a serious threat to user security.Attempts have been made to solve this problem using multisig solutions for 2-factor authentication/authorization, but these have not increased security. Insuring Bitcoin transactions also presents a challenge due to their irreversibility and scarcity. Premiums for insuring Bitcoin would be high. The author believes that a decentralized platform with true 2-factor authentication/authorization schemes can significantly improve personal security. This could make third-party wallet services obsolete, allowing non-technical users to use Bitcoin securely and fostering innovation.Insurance options are a major issue for Bitcoin. A disaster recovery mechanism is needed to address catastrophic failure modes. Bitcoin needs insured storage options to give confidence to early adopters holding large amounts of Bitcoin. An organization similar to ICANN could manage the physical nexus and help with Bitcoin's catastrophic failure modes. Insurance for Bitcoin holdings would involve an insurer holding enough Bitcoin to cover replacement of insured funds, with re-insurance being used to handle simultaneous claims. Large Bitcoin holders are well-positioned to engage in super-cat insurance businesses as Bitcoin becomes a major global currency.In response to a post by Joichi Ito, Director of the MIT Media Lab, discussing the similarities and differences between Bitcoin and the internet, there is a suggestion for an ICANN equivalent for Bitcoin. Alan Reiner, founder of Armory Technologies, highlights the need for insurance options to protect against loss events, including a disaster recovery mechanism. A body managing the physical nexus, similar to ICANN, could address Bitcoin's catastrophic failure modes. Insured storage options are crucial, as custodial bitcoins may be worth more than non-custodial ones. Dr. Ito is invited to join the DevCore Boston conference next month, which aims to support the future development of Bitcoin and is conveniently located near MIT.
Updated on: 2023-08-01T11:14:44.969498+00:00