Speed And Security Are The Keys To The Crypto Market

News, Opinion | April 9, 2019 By:

Before any new technology matures and becomes widely adopted, it passes through what Gartner has dubbed the “trough of disillusionment,” which is defined as the temporary period when an initial surge of public interest in a technology wanes as early experiments and implementations fail to immediately deliver. This phase ends when subsequent progress is made and faith in the technology is restored.

Cryptocurrency is currently going through these exact growing pains: Bitcoin and other digital currencies have stumbled in the last year, with prices dropping over 50 percent and analysts predicting the bottom has fallen out for this market.

But crypto isn’t deadin fact, it may be stronger than ever. The Securities and Exchange Commission reports institutional investment in Bitcoin is at a very healthy level statistically comparable to that of gold. So if that’s the case, what’s holding digital currency back?

There are two main roadblocks to crypto becoming mainstream: speed and security. Here’s how the market can break through these barriers and ensure the growth and wide adoption of this exciting technology.

The Need for Speed

Many people use the phrase “Be there in a jiffy,” but most of them likely don’t know that a jiffy is an actual unit of measurement—specifically, the amount of time it takes for light to travel one centimeter.

Crypto market analysts want digital currency trades to happen in a jiffy as well, but the reality is much slower. Speeds vary wildly, from seven transactions per second on the original blockchain to 1,500 transactions per second on the faster Ripple system. But even the best database can’t compete with credit card companies, some of which process 24,000 transactions per second.

As an added roadblock, many cryptocurrencies impose high fees of roughly $30 per transaction to rush payments. The process is so time-consuming that industry events stopped accepting registration fees in crypto because of the “network congestion and manual processing” involved. This obviously isn’t a sustainable model: the digital currency market should theoretically work like a high-frequency stock exchange, which executes about 80,000 transactions per second. That explains why the best solutions to cryptocurrency’s speed problem have come from the world of finance.

Several banks have developed stable coins with the same value as fiat currenciesone coin is equal to one dollar. Other fintech firms allow people and companies to transfer tokens in real time, cutting out intermediaries and lowering fees. In both cases, the currency works on top of the bank’s infrastructure rather than creating a completely new one that could face lag time.

It’s not clear yet how exactly these transactions would be regulated, though some economists have suggested treating bitcoin assets like securities. But in any case, every industry will benefit from a faster crypto ecosystem.

Protecting Against Hacks

Malware and phishing scams have plagued the cryptocurrency market for years, from the infamous Mt. Gox hack to the theft of $60 million in digital coins from Japanese exchange Zaif. In fact, nearly $1 billion worth of crypto was stolen in 2018 and since it’s not a physical currency, it can’t be recovered.

The digital currency market obviously has to deal with these security flaws, so trading platforms are beefing up their protocols with sophisticated protectionssimilar to those used on financial markets that put customer protection and trust at the forefront.

One important facet of this work involves granting crypto owners anonymity, so their personal data is protected and they’re less likely to fall victim to scams. Antivirus and firewall programs

like those used on computers now protect users from hackers and malware that are out to steal their digital currency.

The financial services industry is also revamping its own compliance and network procedures to help the cryptocurrency community. IPC has partnered with digital trading platform Omniex to give institutional investors the opportunity to access crypto exchanges through its Connexus Cloud. This joint end-to-end security protocol will help users get the most out of this new asset class while protecting their data.

The world of cryptocurrency is constantly evolving and moving faster than any other financial sector. While crypto has gained a better reputation in recent years, it will only achieve full adoption if the trading process gets faster and more secure. Luckily, banks and regulators are working to help the industry overcome these hurdles so that crypto can become a reliable source on the global market.