Peter Schiff’s Bitcoin wallet debacle caused great mirth in the crypto community, but his error highlights a fundamental problem with the system that has existed since day one. Crypto wallets remain more difficult to use than regular bank accounts, spitting out passwords and keys that we have to treat differently, and until the issue is resolved the ecosystem will fail to attract sufficient investment to really kick it on.
Practicality vs Decentralization
One of the critical tenets of cryptocurrency is the ability to be your own bank and look after your own funds. With this power, as the saying goes however, comes great responsibility – by and large, if you send funds to the wrong address then it’s gone. Equally, if you lose the keys to your wallet then it, too, is gone, as Schiff found out to his cost.
While it is easy to laugh at people like Schiff, who once claimed to understand Bitcoin more than most but still didn’t know the difference between his wallet pin and password, the fact that he was able to make the error in the first place shows how outdated and convoluted crypto storage solutions currently are.
Currently, creating a wallet leaves you with the wallet’s password, private key, and potentially a seed phrase too. Also, as Schiff found, many wallets will also require you to set a pin to unlock the app, which is separate. Add in the public key, and that’s five bits of information, four of which are (and should remain) private, and one of which is public. It is not surprising that people mistake one for the other, or treat the private key as publicly as the public key. As a newcomer, it’s hard to get your head around the importance and function of each.
A Major Breakthrough is Required
Even the most sophisticated crypto wallets still result in the same information being generated, and what crypto needs is that killer app that does away with all the keys and passwords while retaining the levels of independence and security that cryptocurrency wallets need. KeyChainX is developing a password-free crypto wallet, which could represent the first foray into this world, but this will by no means address all the problems.
Until it becomes easier to do things right than to do them wrong, mistakes like Schiff’s will ensure that crypto remains the preserve of the enthusiast and will not gain mainstream adoption.