Review: Cryptocurrencies: Bitcoin & Beyond

On July 7, I attended the Cryptocurrencies: Bitcoin & Beyond lecture by David Andolfatto (who divides his time between being a professor at SFU and working in the research division of the US Federal Reserve Bank), an event sponsored by SFU Public Square. My concerns about Bitcoin remain the same: the loss of a private key is a huge risk given that it means the risk of loss is 100%. All the methods one might do to preserve and protect the private key can be thwarted, particularly by someone motivated to do so. Credit cards and bank accounts typically offer insurance of some sort. So far as I can see, most open-source software projects lack a serious quality assurance effort (thus we get bugs like Heartbleed in OpenSSL). Andolfatto has an earlier blog entry with some of his thoughts on Bitcoin.

The prospect of finding a fairer and cheaper way for people, such as wage-earners who need to send money to their rural, impoverished families who are, as the lecturer said, “unbanked”, is very worthwhile. He quoted a figure of $500 billion USD for worldwide remittances, which seems low to me, but in any event the middleman (e.g., Western Union or a similar organization) takes 10% (up to 20+% in some African countries). But one problem with using Bitcoin in that case is that it’s not currently a great choice for a low-literacy user, so far as I can see (many sophisticated users have been ripped off, after all). The World Bank has an article on that subject, and a project to reduce remittance rates: http://remittanceprices.worldbank.org/en

I enjoyed the chance to hear about Bitcoin, although the lecture was not that informative on a technical level.

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