Cryptocurrency has a huge problem, and it’s not the bubble.
The last few days have been crazy and my expectation is that it’s only going to get crazier after this.
If you’re like me you have watched Bitcoin and and some other altcoins go parabolic, crash, come up again just to get corrected and get up again.
It’s a wild ride and if you’re interested in these technologies these are very exciting times.
Some say it’s all a bubble and will probably crash soon, while others are HODLing their coins to witness history like we’ve never witnessed before.
There is a problem though, and I’m not even talking about a potential bubble.
It’s the exchanges.
You see, cryptocurrencies can be bought and sold on exchanges, similar to stock exchanges. Some of these include coinbase, Kraken, Bittrex etc.
Depending on the type of coin you’d like to buy there are better exchanges and worse ones. One thing all of them have in common though: They simply don’t work when they have to.
Whether you’re trying to realize some of your profits by selling Bitcoins or just trying to ride the wave by buying some — as soon as the traffic and interest increases there is literally no way you can do anything about it.
Best case scenario:
- You keep your coins in an exchange (highly insecure and not recommended)
- You have a few orders lined up to stop loss or take profit
- Your orders actually go through
- You can turn this into fiat currency
Worst case and more likely scenario:
- Your favorite exchange throws you a 502 error or a “we’re under maintenance right now” message
- Your coins are not actually on the exchange so you have to transfer them first
- Your orders don’t go through
- Even if your orders do go through you’re stuck with a currency that’s not actually a currency, but should be an equivalent of a USD.
If, as blockchain and cryptocurrency enthusiasts, we’d like this technology to succeed we have to improve this.
Today I’ve read this interesting article, where it said that Bitcoin might actually be the first currency where it’s not the whales (referring to the banks and big institutional investors) that are stealing money from the small people (hobby investors, miners, opportunists) but vice versa. Wall Street really wants to get a piece of the cake but is struggling to move as they are a behemoth bound to regulations.
While regulations are important and will have to come also to cryptocurrency, I don’t think the exchange problem is a regulatory problem. Exchanges need to improve their stability and user experience in order for us small time investors to keep investing into them and the technology.
Otherwise we’ll get wiped out as soon as the whales enter. And that would be against the fundamental idea behind Bitcoin and cryptocurrency.
Addendum and a business idea for free
While I was following the news I came up with a business idea because of this problem that you’re free to use.
The problem is that long time holders of cryptocurrencies have huge amounts of money in either cold storage or exchanges that they need to move out. Obviously they will want to do it once the price rises and races, but because of the problem mentioned above there is no way they will succeed.
Offer a full service agency, that gets you cold hard cash from cold storage wallet for a fee.
Let me not deal with exchanges and addresses, handle all of it for me, take your cut and send the rest to my bank. Prepare my tax declaration so everything is good and make sure you’re insured should something go wrong.
Insurances won’t want to deal with because of the type of business, but if you’re big enough, you will be able to convince a big insurance provider to work with you and insure up to 1 Mio. USD, which is already a big sum that should cover 99% of all your customers cases.
This will have to happen unless the exchanges improve their service, but currently it doesn’t look like they have the resources to match the demand.
