TECHNOLOGY

Why Bitcoin Wallets Are More Secure Than Fintech Apps

Bitcoin has revolutionised how we think about money and how we interact with financial systems. It’s brought forward the debate on the risks centralised payment rails consumers and provides an option that lives outside the purview of large financial intermediaries. We’ve become so accustomed to using banks and fintech apps that we often don’t think about how our money is secured. 

Instead of holding physical cash, we manage our money through numbers on a screen, numbers that are merely an input into a central ledger with no real backing behind it. In addition, we provide these institutions with a host of data, such as our 

  • Balance
  • Salary
  • Debt we have
  • Purchasing behaviour
  • Contact details
  • ID number 
  • Home address 
  • and more

We not only trust these centralised entities to secure our money but also secure our sensitive data. We are making financial institutions and their networks massive honey pots for hackers. A fact that has been exposed several times worldwide, many major banks and fintech apps have been subject to hacks either of customer data or customer funds. 

So how do bitcoin and its software wallets improve on the rails of the current financial system?

Removing third party risk

When you use bitcoin, you’re using a bearer asset, not some IOU that the financial service provider attributes to your account. You are using the exact code that represents the value of that bitcoin. It is unique to you and your wallet, and only you have the keys to spend it. The same way cash in your wallet or a gold bar in your safe is physically in your possession, the same applies to bitcoin in a wallet that you have the keys to use. 

This removes the dependency on financial services to maintain funds to pay people out who make claims. You are not at risk of the bank’s liquidity profile or if they were to go under since you hold all your funds outright.

Achieving final settlement

When you perform a transaction on traditional financial rails, it all works with IOU’s and entities behind the scene taking on risk. When you pay a friend or merchant, you get confirmation that the funds have been removed from your account; the merchant or friend receive a confirmation that funds have been received.

However, the funds can take some time to clear for the recipient to use. In addition, the banks themselves consolidate all the various IOU’s and square up at a later stage as they maintain all the risk involved in the fact that instant settlement cannot be achieved.

In the case of bitcoin, once you broadcast a transaction to the network and it’s picked up by miners, the confirmation takes only 10 minutes, and funds have been permanently transferred. You can even verify the transfer of bitcoin in real-time using a node or a block explorer, so both parties have complete oversight of every transaction performed.

Maintaining your privacy

As you may know, banks record all our data and interactions with them on central servers, which is not very private. Many bank data leaks result in further identity and account fraud further down the line, and the more you use a bank or fintech app, the more data you provide that can be stolen or, worse weaponised against you.

By comparison, using bitcoin, you’re actually lowering your data footprint since you don’t need identification to use bitcoin. All you need is a wallet with a public and private key. You can hide your balances across multiple addresses so no one can tell how many funds you have, and you can use tools like “coin swaps” and “coinjoins” to hide the direction of your transactions and maintain more privacy. 

Bitcoin uses open source software

When you use banking or fintech software, you are at the mercy of centralised services. Firstly your phone manufacturer can shut down the app, the app store can shut down the app, their servers may go down, or the bank itself may stop support for the software.

When using the bitcoin network, you have the freedom to choose the way in which you interact with the chain. You can pick from a range of software, all with their different trade-offs, and you are not stuck in that software for life. You can leave and restore your wallet to a new software provider at any time. 

Not simply a way to speculate

Bitcoin, the asset, may grab all the headlines with its volatile price movements, but bitcoin the network is the most robust, secure and decentralised payment network in the world. It is secured by the most powerful computing network, has never had any downtime and has never been hacked. 

Bitcoin the network offers unique levels of financial freedom that you won’t find anywhere with any bank, fintech company or altcoin.