The current cryptocurrency craze that has overtaken the lives of both the young and old alike may be headed down a darker, more dangerous path. While cryptocurrencies are facing rapidly intensifying growth for the time being, often people forget that they are rooted in something not so infallible: the internet.
The fact of the matter is that cryptocurrencies don't offer the same level of safety and reliability that regulated securities do.
For instance, the bitcoin exchange Kraken is experiencing server errors every few login attempts. Another exchange, the more prominent Coinbase, is struggling with account creation and only has a team of 20 engineers to deal with the backlash. Exchanges take a few days to confirm new users, which reduces mobility of bitcoin and cash on the world wide web. Shapeshift, a tool for converting currencies, has been delaying its trades by hours.
Notable alt exchange currency provider EtherDelta, which has a trading volume of around $11 million per day, also had to suspend services following an alleged hack. Apparently the hackers were able to spoof the domain, possibly in an effort to access user wallets.
All these issues have led people to express concern over the rate at which bitcoin prices are rising, as people freeze more and more of their money in the cryptocurrency.
"Rising prices have two effects on exchanges: lack of support and slow technology," said Kirill Suslov, CEO of Finom. "...Training new team members takes time. And sometimes those support team members have very important roles, e.g. verification where fraud can kill the exchange and its banking relations...there is a technological stickiness. The matching engine and databases that work perfectly for thousands of users become bottlenecks when there are hundreds of thousands of users. Legacy systems have to be over-redundant to cope with increasing demand...the average exchange processes [only] about one transaction per second. Coinbase has exactly the same issue because they also have a huge retail demand from their app business and they get hundreds of thousands of downloads per day making them one of the most popular apps [but] slow[ing] down their servers significantly."
There is also the issue of liquidity, which is quite prevalent today, when people need to be able to pay rent on time, or make cash payments on a daily basis. Cryptocurrencies aren't able to provide such liquidity, especially due to the delayed transactions.
Take Longfin
This kind of volatility is not conducive to a healthy market, and until it can be controlled, the fate of cryptocurrencies seems opaque.
