The unspoken side of the blockchain. Can we live without the third party?

June 25th 2017
Author profile picture

@lukaskaiLukas K

The new panacea for those who want to be free?

Imagine the world where there are no corporative monopolies ruling your life, no central government making the laws and forcing you to follow them. Imagine the world with no multinational banks, no big brother following every move of your penny.

Sounds like the new version of John Lennon’s “Imagine”? Well, that’s exactly how the world vision looks like if you start reading about crypto world & blockchain. But can it really be the new utopia for people who want to become free?

The vastly sold pitch sounds like this — Cryptocurrency and the blockchain gives a lot of possibilities and opens up new opportunities for efficiency, speed and eliminates the need for a trusted third party. In other words, the formula is -> (possibilities + innovation + efficiency + speed) — third party = crypto world.

Because it is so intriguing, new and in most cases —revolutionary, there are so many people entering crypto space, buying Bitcoin or Ether and hoping to make a profit in a couple of days. However, anyone who enters the market carries a variety of responsibilities and risks. Unfortunately, I don’t believe the majority of newcomers understand that.

That’s why I would like to raise a question: can a simple human being live in a world without a centralised trusted third party? Let me investigate couple of the not so much discussed aspect of blockchain world, in order to examine this panacea.

Your password — your responsibility

There is no such a thing as Forgot your password? in the crypto world. Once you got it wrong — you lost it forever. Anyone who owns a private key will tell you that it’s not a good idea to have it stored on any device. Better have it written on a piece of paper. Have one in your home and give a copy to your mother.

But to be honest, password loss is not the major problem. There is a huge risk of funds loss due to the theft of private keys or some software/hardware crash.

Owning a Bitcoin is equal to knowing the private key for the digital signature that is required to initiate the transactions. The key can be stolen by a virus, you can lose your phone with a Bitcoin wallet or simply your computer may break down. There is no possibility to recover lost private key.

Of course, you can store your cryptocurrency on the exchange. However, the exchange can be hacked or the exchange owner can simply disappear with your money. This would end up in losing all of your funds.

They say that the beauty of blockchain is that people initiating the transaction don’t even need to trust one another due to the brilliant technology of blockchain. However, keep in mind that it doesn’t mean that fraud of theft does not exist. And it leads us to the next point — irreversibility.

What happened cannot be changed

Due to the fact that blockchains are irreversible and append-only, there is no way to recover stolen bitcoins. In a today’s world, you trust banks and regulators to protect your funds and create rules for business entities. Most of the transactions can be reversible with banks collaboration, right?

In the blockchain, such possibility is removed by design. You cannot change anything that has happened (with a small exception). Copied the wrong address and sent funds to some random person instead of your business partner? Your problem. Hacker hacked funds from a multi-signature wallet with a bug? There is no way to get those funds back. There is no blockchain police, no “mistake” policy, it is your own responsibility.

A world without a trusted third party

The world in blockchain is a place where you do not need to trust anyone except yourself. No intermediaries and no middlemen to facilitate the transactions and interactions between two parties.

You trust only consensus algorithm which is implemented in the blockchain and/or a smart contract that is deployed in a network. This requires you to understand what is hiding beneath the surface to feel comfortable using the whole ecosystem.

However, most of the non-technical people won’t be able to catch up the pace and even lose a lot of money as they learn. But that’s probably the price we have to pay till the market and its participants mature.

Is really that bad?

Actually, it’s not. The key thing here is strong technical basics of the blockchain and understanding of how the things work underneath (To start your journey you can read the intro to blockchain here).

The knowledge will enable people to feel secure and confident in the market. As the whole ecosystem progresses very fast, the earlier people join, the better.

So before you start buying any cryptocurrency I suggest studying every bit of blockchain. Understand how blockchain works, examine what causes cryptocurrency fluctuations and most importantly consider the risk you are taking.

Most secure crypto currency hardware wallet is Ledger Nano. It provides hardware security for every user only for €59. Find out more here.

I will be reviewing the most important aspect of the industry, so follow my medium blog and sign up for the newsletter to be updated.

Enjoyed the article? Please let me know by clicking green CLAP below or send a recommendation to a friend. Thank you!



The Noonification banner

Subscribe to get your daily round-up of top tech stories!