😯 Crypto's Biggest Weakness is Centralization

What's going on: Blockchain's prime feature is it's use as a secure, immutable distributed ledger. Because it's managed by a peer-to-peer network, which is collectively validating transactions, it's nearly impossible to trick the network (a 51% attack being the unlikely but possible exception). And yet Bitcoin's and other cryptocurrencies' biggest vulnerability is centralization.

This single point of failure of crypto is the exchange. The biggest one, Coinbase.com, now has more than 13 million users, and was adding an estimated 300,000 users in the last week of November alone. Most of the new users are newbies, who store their Bitcoin, Ether or Litecoin on Coinbase.

Coinbase and other popular exchanges are theoretically not only vulnerable to hacks (the last one happened at the centralized mining marketplace NiceHash), but also to government regulation, software bugs, human error and malicious intent.

Source: hackernoon.com

Why should I care: I admit that security wise Coinbase is for sure one of the more secure exchanges you can use. But practically you don't really own your private keys, and therefore you don't really own your coins or tokens.

Better informed crypto investors know that hey must not keep coins on exchanges and that they ideally use wallet were they have full control over their private keys. A paper wallet or a hardware wallet like the Ledger Nano S are good solutions.

A hypothetical Coinbase-hack, bigger outage or harsh government regulation would probably not affect knowledgeable people like us, but it could really damage trust and could cause panic among newbies, that caused the recent price spikes.

Source: theguardian.com, cnbc.com, fortune.com (nice long read on Coinbase)
GIF: giphy.com

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