Data obtained from Chainalysis, a leading crypto data analytic firm, the four biggest crypto exchanges since 2018 Coinbase, Binance, Huobi, and Bitfinex received about 40% of all BTCs via exchanges this year.
The next ten crypto exchanges collected 36% in a combined volume of BTCs leaving other smaller exchanges to share out the remaining 24% of transfer volume.
Chainalysis, in a detailed report, also analyzed that though about 96% of retail traders made most of the transactions, the professional traders controlled most of the volume;
“Retail traders, whom we categorize as those who deposit less than $10,000 USD worth of Bitcoin on exchanges at a time, appear to be the large majority, accounting for 96% of all transfers sent to exchanges on an average weekly basis.
“Professional traders, however, control the liquidity of the market, accounting for 85% of all the USD value of Bitcoin value sent to exchanges,” the report said.
Chainalysis also concluded that Bitcoin’s supply makes it similar to gold, giving it a safe haven asset status as digital gold.
“But this digital gold is supported by an active trading market for those who prefer to buy and sell frequently. The 3.5 million Bitcoin used for trading supplies the market, and, in interaction with the level of demand, determine the price.”
The report by Chainalysis also spoke about where Bitcoin presently stays. It said;
“Roughly 60% of Bitcoin that is not lost is held by a licensed custodial service, or as FATF would refer to it, a Virtual Asset Service Provider (VASP). Most cryptocurrency exchanges would fall into this category, along with hosted wallets.
“As we can see, this share has risen steadily over time, reflecting the growth of custodial cryptocurrency businesses as Bitcoin has gone more mainstream.
“The dominance of VASPs becomes even clearer when we consider that, of the remaining 40% of available Bitcoin, which is not currently held by VASPs, 87% has passed through a VASP at some point.
“Most people either hold their Bitcoin on VASPs, or acquire their Bitcoin from VASPs.”
Thousands of years ago people were exchanging goods for other goods – that’s what we call bartering. Then the government-controlled currencies, also known as fiat currencies were introduced. It was a huge leap forward for our society because people were finally able to trade more conveniently and huge distances between parties became much less of a problem. The appearance of the term “money” is one of the most important keys to creating the world we live in today.
However, since the beginning of the new century, like many great inventions, traditional currencies started to become obsolete. Nowadays, our society demands things to happen immediately. By today’s standards, waiting for more than a week for goods to arrive and more than an hour for the transaction to complete is unacceptable. As CEO of cryptocurrency payment processor CoinsPaid said in his interview: “As a currency becomes more digital, customers’ wants to become more aligned to faster payment methods”. And this trend will only become more present. From exchanging bread for butter to ordering sushi via messenger app: we are on the verge of another drastic change in how we approach payments.
In this article, we will talk about how the introduction of cryptocurrency payment systems will affect both customers and businesses.
You own your data
Financial institutions like banks collect most of the information about customers’ personalities and finance. Your bank knows your name, where you live, how much savings you have, everything about your investments, credit score, whether you married or not and the list goes on. Moreover, businesses also gather information about their consumers. Your browsing history on e-commerce sites and bits of your personal information are always stored and used by them.
Using cryptocurrency payment systems allow users to remain anonymous. The nature of blockchain technology implies that the only accessible piece of information is a string of numbers that is tied to your virtual wallet. Surely enough, there is still some personal information available to businesses, but the amount and significance of it are not comparable to what credit card transactions provide.
Less or no commission at all
One of the main ideas of the banking system is to make money using the money of its clients. ATM withdrawals fee, transaction fee, the yearly fee for having an account – almost any service offered by a bank comes along with a certain amount of money you have to pay.
Crypto wallets are superior to bank accounts on this matter. The majority of crypto processing systems offer to open a wallet for free and transaction fees are small or non-existent. For example, CoinsPaid provides its customers with 0% commission from transaction fees through its ecosystem.
Global and instant
Cryptocurrencies often don’t belong to any country, as traditional currencies do. Most of the cryptocurrencies available on the market are decentralized, which means it can be instantly traded across all of the parts of the globe. Banks on the other hand often have limitations when it comes to international trade, but all you need to trade crypto is internet access.
Speed, thus security
Today’s payment system provided by banks is always under a risk. Billions of dollars are lost due to credit card fraud worldwide. When you buy goods or services using credit cards, your transaction often takes days to complete, because your money always has to go through a third party, before reaching the receiver. This is the time when fraudulent actions take place. The customer cancels his payment before it’s processed, which means that business may already send goods or perform service without receiving any money. When it comes to crypto, once a transaction has been performed, there is nothing that can be done to reverse it.
Moreover, fraudsters often use drawbacks of the centralized nature of the banking system. The thing is that if a person may hack into the bank’s database – he instantly has access to information of every person in that database. However, because of the fact that most cryptocurrency processing systems are decentralized, there is much less risk of such a situation.
This may be not so obvious advantage at first sight, but considering the number of people that use crypto today, this may be a turning point for some businesses. If a customer happens to be an active cryptocurrency user and there is 1 out of 10 businesses in a particular niche that accepts crypto, it may be the determining factor in customer’s choice.
Moreover, he will most likely return to the same company next time. The adoption of the cryptocurrency processing system by most businesses is inevitable in the long run, but those who can get ahead of the competition earlier can easily win over this specific target audience.
Installing a cryptocurrency processing system for your business can be done easily and in the shortest period of time. Service like CoinsPaid would be a perfect example.
Lower prices, same profit
Cryptocurrency transactions can have a commission between 0 and 1.6%. Banks, on the other hand often charge somewhere between 0.5 to 5% for one transaction, depending on location, type of currency, etc. With this in mind, businesses now can attract more customers by lowering the prices, while receiving the same amount of profit per transaction.
Centuries ago the introduction of traditional fiat currencies was an enormous step for better living and convenient trading. However, unfortunately, those payment options don’t satisfy the needs of the current society.
Cryptocurrency payment methods offer huge advantages over traditional ones: lower fees, faster speeds, lower prices and a higher level of security. The introduction of crypto payment systems is the next step for better trading worldwide.
Bitcoin and other cryptocurrencies allow for the decentralization of the entire financial situation. One of the consequences of that is that you get to be your own bank. Rather than letting a bank look after your money – and charge you a fortune for doing so – you can look after your own crypto assets. But that also means you must take responsibility for the security of your digital currencies.
Unfortunately, there are dishonest people out there doing everything they can to get hold of your wealth. As more people are buying and storing cryptocurrencies, hackers have more incentive to try to hack every device they can to steal those digital assets. They are also becoming more sophisticated over time.
All this means you need to take secure storage of your digital assets seriously. It also means that whatever method of storage you decide on, you need a backup of your wallet, and you need to know how to recover your wallet.
Cryptocurrencies are going to be an increasingly important part of our future, and it’s important to develop a habit of securing your digital assets properly and knowing what to do if a device fails, or if it’s stolen.
To help you navigate the options and some of the confusing jargon that comes with them, we have put this guide together.
First, let’s define some of the key terms you will come across when you buy, sell or store Bitcoin:
Wallet: A wallet is used to store private and public keys. A wallet can be compared to a bank account, a credit card, or even the wallet in your pocket. However, unlike these, a crypto wallet doesn’t actually store your Bitcoin, but rather the keys you use to access your Bitcoin.
Public Key: A public key is like a bank account number. This is the address another sender will use to send Bitcoin to you.
Private Key: A private key is required to access your Bitcoin. In order to send Bitcoin from your wallet, you will require the private and public keys.
Software wallet: A software wallet is a wallet that you download to a PC, notebook, or mobile device.
Popular Bitcoin Software Wallets include:
For Windows: Bitcoin Core, Electrum, ArcBit, Armory
For Android: Bitcoin Wallet, Bither, Edge, Electrum, Airbitz
For iOS: Edge, Green Address, Bither
Hardware wallet: A hardware wallet is a device similar to a USB stick that allows you to store your keys offline.
Popular hardware wallets include: Trezor, Ledger Nano S, KeepKey
Hot wallet: A hot wallet is any wallet that is online. This can be a software wallet on your own devices, or a wallet hosted on an exchange or elsewhere in the cloud.
Cold Wallet: A cold wallet is an offline wallet. Cold storage means either keeping your keys on hardware wallet or printed on a piece of paper, stored in a safety deposit box or hidden somewhere.
Backup: A backup is a file containing your private and public keys which will allow you to restore your wallet if you lose a device or if your hard drive is damaged.
Which Wallet Is Right for You?
Your choice of wallet comes down to the trade-off between security and convenience. The easiest way to store Bitcoin is on an exchange. However, this is also the least secure method. When your cryptocurrencies are stored on an exchange, you do not have control of your keys. If the exchange is hacked, the hackers can steal the assets belonging to all the exchange’s clients, including yours.
At the other end of the spectrum are hardware wallets and paper wallets. If your assets are stored offline, hackers can’t get hold of them. But this also means you need to take full responsibility for storing your keys where nobody can get them.
If you own very little in the way of Bitcoin, an exchange is probably the way to go. If losing your Bitcoin would be a big problem, a software wallet is a better option. And, if your crypto assets are worth a considerable amount, you’ll want to keep the bulk of those assets offline, either on a hardware wallet, or a securely stored paper wallet.
All the Ways to Back up Your Bitcoin Wallet
One of the disadvantages of decentralized ledgers is that you cannot retrieve a lost password. If you lose the password to the website, or if you forget the PIN code for a bank account, there is always a way to reset that password.
Public keys are like a bank account numbers on a blockchain, and private keys are the passwords to access those accounts. The problem is that if you lose either, there is no one to turn to. If you lose the device that stores those keys, they are gone forever, and so are your Bitcoin. Therefore, you must always back up your wallet.
There are several ways to back up your wallet, the following being the most popular:
Seed phrase: Most wallet software does include a recovery process. The software will generate a seed phrase, which you need to write down and store somewhere safe. If for whatever reason, you lose your wallet, you can use this phrase to recover it.
The words need to be in the exact order they are generated. For most wallets, if you lose your password, it cannot be recovered or reset, however, if you do lose the password, you can recover the wallet using the seed phrase.
Text File: Software wallets have a function that allows you to export your keys. On some wallets, the function is labeled backup wallet, while on others it is labeled export keys. When making backup files, it’s a good idea to disconnect your computer from the internet before doing so.
On the Electrum wallet, the function is under Wallet > Private Keys > Export and looks like this:
Once you click on Export, you will be able to choose between a CSV file or a JSON file, and then choose the drive to send it to.
The file that will be generated is a text file containing all your public and private keys. Remember that once you have that file on your computer, anyone who has access to it has access to all your Bitcoin. As soon as you have created a backup file you should move it somewhere secure, encrypt it (see below), or delete the contents of the file. If you delete the file, go to your Recycle Bin and delete it there too – that’s one of the first places hackers will look for valuable information.
Copy Wallet.dat Files: The other way to make a digital copy of your wallet, is to copy the file the wallet uses to store the keys. Each software wallet stores the file in a slightly different location on your PC, so look at the documentation to find it.
The Electrum wallet stores this file on Windows as follows:
For Apple and Linux operating systems you can search for: ~/.electrum
You will probably have to make sure hidden files are being shown to find it.
Paper Copy: One of the safest ways to store your keys is to make a paper copy. Disconnect your computer from the internet and print out the file. Then cover the paper with foil (so it cannot be viewed against a light source), and seal it in an envelope. This should be hidden somewhere, or stored in a safety deposit box or a safe. Once you have done this, remember to delete the file you printed from your computer
How to Encrypt a Digital File
If anyone can open a digital backup file, they have access to all your keys, and therefore all your Bitcoin. For this reason, it’s a good idea to encrypt the file with a password.
When it comes to encrypting a file, there are several options. Most operating systems have a built-in encryption function that is secure enough for most people’s needs.
If you want to use the best encryption possible you can download encryption software from VeraCrypt, AxCrypt or a similar provider. This software allows you to choose between several methods of encryption. You can usually choose between 128 and 256-bit encryption and you can to use two-factor encryption too.
Where Should You Store Your Backup Files?
If you have made a digital backup file (preferably encrypted) you will need to store it somewhere. There are a couple of options for storing these files. Remember, there is little point keeping this file on the same devices as the device with the original wallet on it.
You could store it on another PC, notebook, or even a mobile phone or tablet. Or you can store it on a USB drive, but not if you are likely to lose the drive. The safest way to store a backup file is on a USB drive in a safety deposit box at a bank, or in a safe.
Digital backup files can also be stored using cloud storage services like Dropbox, One Drive, and others. Some people are skeptical of the level of security offered by the most popular cloud services, so make sure you encrypt files before sending them to the cloud.
Restoring Bitcoin Wallet
Restoring a Bitcoin wallet is easier than it sounds. If you have a seed phrase, you can simply use the ‘Restore’ function. Even if your device is lost or stolen, you can download a new wallet on another device, and restore it using the seed phrase.
Simply look for the ‘Restore’ function in the menu, and follow the instructions.
To restore a wallet using the wallet.dat file, simply replace the default wallet file on your computer with the backup file you made. It’s as simple as that.
If your backup file is a text file, you will need to log into the wallet interface, create a new wallet, and then copy and paste the keys from your backup text file. Again – it’s as simple as that.
Your Last Will and Testament
There’s one last thing to consider. Another challenge that cryptocurrencies have introduced is inheritance. If, or rather when, we die, if no one else has access to our Bitcoin, it’s impossible for them to be passed on to our heirs. Even if you explicitly state in your will that you are leaving your crypto assets to a spouse or child, without access to your keys, they will have no access to your digital assets.
There are several ways to make sure your heirs can access your private and public keys. Here’s a relatively simple solution: Create a simple text file with all your keys on them. Put the file in an encrypted, password-protected file on a USB stick. Use a different password from all your other passwords for this. Then give the USB stick to a family member and ask them to keep it somewhere secure. Finally, include the password for the file in your will, a copy of which is kept with your solicitor. When you die, the password will be given to your family, and they will have access to the file on the USB stick.
There are two important aspects to remember about storing your Bitcoins. Firstly, you and you alone are responsible for making sure your crypto assets are safe and that they can’t be accessed by hackers. And secondly, if you are securing your assets properly, there is no password recovery option – if you lose your wallet or access to it, your Bitcoins are gone forever.
For this reason, it’s is important to have a process to both secure your keys using a wallet AND backup those keys. Even if you don’t yet have a large Bitcoin holding, it’s worth getting into the habit of doing this thoroughly. Cryptocurrencies will play an increasingly large role in our lives in the future, and storing them properly will only become more important with time.