Crypto in the WSJ!!??!

No, it’s not December 2017, Bitcoin is not at $20,000 a coin, and not every news source and their mothers are reporting on cryptocurrency and blockchain. So, it always catches my attention when crypto and blockchain make it into mainstream news nowadays. Somehow, this (https://www.wsj.com/articles/a-crypto-mystery-is-140-million-stuck-or-missing-11549449001) article made it onto the front page of the Wall Street Journal. To give a brief summary, Gerald Cotten, CEO of QuadrigaCX, the largest crypto exchange in Canada, reportedly passed away on December 9, 2018. He was in sole possession of the wallet that stored all of Quadriga’s customers crypto funds. As a prime example of the regulation desperately needed to legitimize the crypto industry, it is highly unlikely that any of the customers will receive any compensation for the incredibly poor operations of the exchange.

In the realm of unregulated cryptocurrency, it is possible that Cotten may have faked his death and made off with the money, however cryptocurrency tracing companies Zerononcense and Elementus Group have not found any suspicious transactions from the sole QuadrigaCX account.

Looking past the obvious problems caused by the poor management of Quadriga, this shows the security of an immutable ledger and the immense power that individuals have over their own finances. Corrupt governments and large institutional banks would not have control over their citizens finances. Instead, everyone would be completely responsible for their funds. It also serves as an important reminder that if you do not own the private key, the cryptocurrency is not really in your possession. The customer losses could have been prevented had they withdrawn their funds off the exchange and into their own wallet. In terms of governance, regulations should be in place that require access to be granted to multiple trusted individuals in the case of an unfortunate event like this occurring.

It seems as though keeping all of the clients’ funds in one account, to which only he knew the password, is the equivalent of a bank keeping all of their customers’ cash deposits in a single safe with one key. If the key is lost, then all the money is trapped. This would be seen as negligence on behalf of the bank, not a failure of the monetary system. However, new technology is always accompanied by challenges with adoption and governance. The internet still faces instances of security flaws, even 20 plus years after its adoption. For example, in 2017, a number of UK hospitals had confidential patient files hacked and demanded ransom payments. It is suspected that the ransom payments were met in exchange for the release of the files. Instead, if the files were stored on a blockchain and everybody has control over their own health records, hackers would not be able to gain control over a mass number of records by launching breaching one central database. While the Wall Street Journal and other mainstream news outlets are quick to criticize cryptocurrency and blockchain when failures occur, it is important to acknowledge the potential that blockchain holds as greater industry regulation improve will improve adoption.