“If you don’t own your keys, you don’t own your bitcoin.”
This adage has been around since the early days of cryptocurrencies, when Bitcoin was the only game in town, and when exchanges disappeared faster than you can say “application-specific, integrated circuits”. The idea behind this proverb was that leaving your Bitcoins on the exchange where you bought it was inherently risky. It was much safer to transfer your Bitcoins to a hardware or software wallet, which gave you control of your private keys. It made sense at the time, but in today’s crypto world, it just doesn’t ring true.
100 years ago, if you came upon a sizable bit of cash, you were faced with a dilemma. You could keep your cash, hide it away in your home somewhere — in a safe, under the floorboards, in your mattress. Obviously, this was risky — safes could be cracked, floorboards pried up, cash could be stolen, or destroyed in a fire or flood. Or you could deposit it in a bank, where it would be safe from theft or destruction. But banks sometimes failed, whether through their own malfeasance or ineptitude, or simply the whims the of the markets. If you had money saved in that bank, it was gone.
This was the world of crypto five years ago. You had two risky options to secure your Bitcoin: exchanges, online wallets, and other services prone to failure or malfeasance; or software and hardware wallets that you set up at home. It was generally safer to protect your cryptocurrencies at home, but it required some technical expertise and was not without risk.
Things have changed a great deal in the past 100 years. While a few people still like to keep their cash in their mattresses, most of us deposit it in a bank, secure in the knowledge that the banks are now heavily regulated, and that even if your bank fails, it won’t take your savings with it. This is today’s world of crypto, and Saifu is the metaphorical equivalent of your local bank.
Saifu, while not a bank, is licensed by the Czech National Bank as a payment institution. Our license from the CNB imposes strict liquidity requires, and thorough KYC and AML policies. We’re also regularly audited by the world’s largest accountancy firm, Deloitte. We also offer bank-grade security to protect your cryptocurrencies using hardware from security giant Thales, a world leader in cybersecurity. Our users’ cryptocurrency keys are born in Thales Hardware Security Modules, and can’t be accessed without technicians being physically present, simultaneously inserting keycards. This means your keys are protected, even if we’re hacked.
Securing your cryptocurrency at home is like keeping your cash in a safe. For almost everyone, it would be safer in a Saifu account. Some people might argue that putting your cryptocurrency in an account similar to a bank account runs contrary to the spirit of cryptocurrencies. Cryptocurrencies are often thought of as anonymous and decentralized. Doesn’t depositing your crypto in a regulated institution sacrifice that anonymity and decentralization?
Decentralized, Anonymous, or Neither of the Above?
When Bitcoin was created in 2009, it had a noble goal: to become a decentralized digital currency, a global currency free from the whims of central banks, insulated from the economic woes of any particular nation’s economy. Nine years later, Bitcoin has evolved, and has inspired a wealth of other cryptocurrencies. These different cryptos offer different features, but all of them operate on a principle of decentralization. But what is decentralization, and why is it such an important feature?
Decentralization, in regards to cryptocurrency, is the idea that no single individual or organization is in control. There is no central bank that controls the supply of Bitcoin or Ether. Cryptocurrencies exist on a peer-to-peer network, their supply and their value is solely determined by the market. Decentralization is not a zero sum game, however. No cryptocurrency is perfectly decentralized, and some are more centralized than others (cough Ripple cough).
Let’s look at Bitcoin, which has some decentralized and not-so-decentralized elements. Bitcoin is built on a blockchain, which is essentially a public ledger that lists every Bitcoin transaction that takes places. Anyone with a modern computer and a good internet connection can run a Bitcoin node, allowing them to see transactions on the blockchain. This is a peer-to-peer network and has a low barrier to entry, i.e., very decentralized.
Bitcoin mining — the process by which transactions are validated and new Bitcoins are created — is open to anyone but it requires serious investment in hardware, and consumes a lot of electricity. This has led to some concentrations of power in the Bitcoin mining world. There are also occasional updates to the software that Bitcoin nodes run. There is sometimes some disagreement about these updates, but eventually everyone adopts the same software. The developers who write this software tend to end up with a lot of influence in the Bitcoin. These aspects of Bitcoin are less decentralized.
There is also an element of anonymity to most cryptocurrencies. A Bitcoin wallet address is just a string of letters and numbers, and anyone can create a Bitcoin wallet. There is no verification process, nothing that initially ties you to your wallet address. Anyone can create a Bitcoin wallet anonymously. There’s nothing in the process that identifies you. But when it’s time to buy some Bitcoin for your wallet, you’ll find that there are very few options for buying or selling Bitcoin anonymously. All major exchanges require your personal information, and the governments of the world are quickly clamping down on those few that do not. And even if you find a way to buy Bitcoin anonymously, you’ll face the same challenges when you want to spend it.
Different cryptocurrencies have different protocols. Some are more decentralized than Bitcoin, some less so. None of them however, are perfectly decentralized, and aside from a couple crypto hobbyist currencies (e.g., ZCash), none are truly anonymous. Letting Saifu secure you cryptocurrencies does not compromise the principle of decentralization, or sacrifice your privacy, any more than buying it on an and storing it on thumb drive in your desk. It is, however, a much, much safer option.