As a co-founder of BitGo, you already know I’m a huge fan of Bitcoin. I wholeheartedly agree with the proponents of Bitcoin that share a vision for a new world of finance based on crypto currencies. To recap the benefits of Bitcoin: Bitcoin puts the power of money into the hands of the people at low cost. It is a system where the bank can’t steal your money (crooks), the government can’t steal your money (inflation and poor monetary policy), and hackers can’t steal your identity (trivially forged credit card systems). It’s fantastic – it’s internet cash with zero fraud and low cost.
But the entire industry is largely in denial about the suitability of Bitcoin for the real world.
The conundrum for Bitcoin is simple:
To develop this great system, we’ve used crypto “keys” and put them directly into your hands. This simple concept is the core that puts you completely in control of your own money. Sounds great!
Unfortunately, and this is what the entire industry seems to ignore, it’s highly unlikely that you are competent to keep any of the “keys” to your own money, in spite of the benefits in doing so. The problem is that in the digital world, managing the “keys” to your life savings means that you must be part techno-geek, part cryptographer, and part super hero. Chances are that you’re none of these and completely unfit to manage the keys to store any significant amount of value.
Bitcoin proponents (myself included), have thought for some time that we’ll solve the usability of Bitcoin and solve this issue. I still think we’ll make inroads. But as I look in more depth at Bitcoin and the viability of Bitcoin for mass markets, I’m increasingly convinced that this will just never happen. We don’t ask Wells Fargo how they secure the vault, and none of us would pretend for a minute that we’ll have vaults at home which are suitable to store our life savings. Bitcoin may be digital, but the monitoring, backup, and safe handling of millions of dollars is simply not a casual task. Consumers will never be ready for this.
Rest assured, I’m not predicting the doom of Bitcoin. I’m simply articulating what so many seem to deny: key management is not going to be a strength of consumers. For Bitcoin to work, we need revolutionary change in the way we store and manage keys. The Bitcoin protocol is great at a low level, but the key management problem is simply out of reach for consumers and businesses today.
I wish that I had an answer to this right now. Certainly many of the things BitGo does, such a multi-signature wallets, multi-user approvals, key sharding, and more help to mitigate the complexity problem. But the fundamental issue of trust-less, safely stored and safely backed up keys remains out of reach for most everyone. Until we solve this problem, Bitcoin will be relegated to a niche form of money with little chance of success.
You can probably guess what my highest priority is right now.