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Bitcoin Ecosystem You Need to Know

Bitcoin Ecosystem

December 4, 2020 | 

JOHN K MWANIKI |  0 Comments| 

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Bitcoin has revolutionized financial transactions. What was once a digital start-up is now threatening to topple fiat currencies. Government and central banks are not having the easiest of times with the cryptos.

The cryptos have made faster and cheaper transactions the order of the day. This is as it even gets to mainstream usage. It is also helping companies raise money. Most companies currently prefer Initial Coin Offering (ICO). They are moving away from the popular Initial Public Offering (IPO).

ICOs are easy to set up and trade. They don't need much documentation and rules to fulfill. The offerings are also open to a broader audience. They don't restrict the audience based on earnings or location.

These changes have seen the coin become useful in most quarters. They are even attracting institutional investors. Even those who earlier didn't rate the cryptos are now taking them up.

The success of Bitcoin has inspired other coins like Ethereum, Ripple, and Tether. These are part of the thousands of other digital currencies in the world.

While the cryptos grow, they haven't reached the end. Most traders are wary of security concerns. The need for customer safety has led to the creation of a fintech trusted Bitcoin ecosystem.

Here is all you know to know about the ecosystem;

Bitcoin Ecosystem Challenges 

Even though cryptos have so far done well, they haven't become mainstream currencies. The Bitcoin ecosystem faces several challenges that make it hard to use. Several concerns like volatility and power consumption are solvable. Still, some pose severe threats to the Bitcoin ecosystem.

These include;

Privacy vs. compliance

Bitcoin and other cryptocurrencies have grown on the premises of privacy. Decentralization in digital currencies means one can transact without anyone having the details. They could keep names, amounts, and locations out of the public view.

Privacy, though, is becoming a concern. Most illegal outfits are taking advantage to carry out illicit transactions. Terrorists and traffickers are using Bitcoin for transactions.

The Bitcoin ecosystem is becoming mainstream. This calls for more regulations. The regulators are to ensure access to the transactions. Already Bitcoin is complying with most of the needs. It provides for a public ledger that allows access to public keys. The crypto exchanges also apply the KYL and anti-money laundering processes.

While Bitcoin becomes more regulated, it becomes more like traditional currencies. 

Some cryptocurrency users still believe in anonymity. This had led to the rise of the privacy coins.

Asset Security and Vulnerability 

The bitcoin ecosystem has also grown on the premises of security. The only concern is how to balance security and ease of access. While virtual currencies are secure, they make it a little harder to access the platforms.

Bitcoin works such that it provides for keys. These keys are long terms with multi keys. They are easy to misspell. Any mistake, and you send the assets to the wrong account. With offline storage, it becomes harder to copy and paste the keys. They only allow little chance for error.

Bitcoin also doesn't provide backup. Once the keys get lost or misplaced, that's the end. You will never reaccess your assets. This calls for the use of other third party wallets back up services. Cloud storage has been mainly used for such services.

The backups make the keys vulnerable to other hacks and illegal access. This beats the whole idea behind the need for security. It means Bitcoin is still susceptible to attacks.

How the Bitcoin Ecosystem Solve the Concerns

Bitcoin, in itself, is never hacked. The only issue is trying to make it more accessible to the non-tech savvy and the other regular users. The Bitcoin ecosystem makes the platform accessible while not compromising on security.

The platform seeks to do this by various means. It wants to ensure clarity on the custody of permissionless digital transactions. 

It makes the precise role of service providers and corresponding liabilities. 

The Bitcoin ecosystem also seeks to ensure secure onboarding on the crypto platforms. This comes with proper identity management. It means the platforms keep security while also avoiding illegal transactions. It provides for how to identify illicit transactions. These come with corresponding actions. Money laundering and tax evasions are things of the past with the Bitcoin ecosystem.

The ecosystem helps in key management and funds recovery. It ensures security on software clients like wallet providers. This comes with proper transaction monitoring, interception, and actionability.

While all these might be in place, there is still the possibility of slip. Bitcoin ecosystem provides risk mitigation procedures in case of successful attacks.

Components of the Trusted Bitcoin Ecosystem 

To execute the above plan, the Bitcoin ecosystem has several components. These take the place of the current complacent ones. These components are;

  • Wallet – the wallet is a multi-function component of the ecosystem. It supports onboarding and executing trading functions. It also helps in maintaining the customer's private key.  

  • Identity service – the ecosystem requires identification for protection against illicit transactions. It seeks all the relevant identification details. Then provides a certificate which the user will have for all transactions.  

  • Co-signer – this is what gives the platform its secure nature. It counters checks all transactions to ensure certification. It provides all compliance and manages a secondary private key.  

  • Exchange integration – the platform allows for digital currency trading through third-party exchanges. It yet has to do due diligence before partnering. The exchange must be compliant and secure enough.  

  • Reporting service – this is the data management tool of the ecosystem. It receives information from all the transactions. It then verifies and processes the information. It does not permit any uncertified account from transacting. 

How Transactions Occur within the Trusted Bitcoin ecosystem 

Transactions within the Bitcoin ecosystem is like any other in crypto trading. The only difference is that it provides extra protection.

It allows for transactions within select crypto exchanges. These exchanges must meet all regulatory demands. 

The ecosystem also allows for transactions only for certified users. It is free from illicit transactions. 

Bottom Line 

Ensuring compliance without affecting privacy is hell to Bitcoin. The same applies to asset security and vulnerability. The trusted Bitcoin ecosystem is making it all possible. This it does by providing an extra layer of protection. 

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