The news of PayPal’s (NASDAQ:PYPL) entry into crypto, enabling users to buy, hold and sell cryptocurrencies, including Bitcoin and Ethereum, adds to the bullish sentiment in the market and provides another indicator of growing mainstream adoption. The payment giant joins the likes of Square (SQ) in embracing Bitcoin, despite having initially dismissed the technology.
Since new entrants are cautious of the perceived dangers in the space, however, there is a need for solutions that can lower the barriers to entry, strip away complexity, and reduce risk. Here are three projects working on solutions to make crypto more welcoming for newcomers – and more useful for long-term participants.
Sögur’s Volatility Dampening
Volatility is one of the most regularly cited concerns for investors when it comes to digital assets, and the greater the volatility, the greater the price risk. Given the comparative immaturity of the asset class and lack of liquidity compared to traditional markets, crypto can be subject to significant price swings. As a result, it is more susceptible to negative developments, such as exchange hacks, as well as macro geopolitical events that impact all markets.
Cryptocurrency project Sögur aims to tame such volatility via its SGR token. Sögur’s monetary model, backed by a variable reserve held in national currencies, mirrors the composition of the IMF’s SDR and is designed to build trust and stimulate growth. The key feature of this model is blockchain-based liquidity provision: a smart contract that offers to sell and issue new SGR or buy back and burn tokens. The aim is to dampen volatility in the short-term while still allowing market forces to determine SGR’s value in the long-term.
This feature allows SGR to ensure its purchasing power does not change significantly day-to-day. It does not require a fixed exchange rate with any particular currency, but its value should not be erratically volatile either, offering the best of both worlds.
Kirobo’s Safe Transactions
Fears over the safety of making transactions without losing funds is another significant concern, with over 18% of cryptocurrency users estimated to have lost funds through sending errors, according to the 2019 FIO Blockchain Usability Report. Cryptocurrency transactions require a greater level of personal responsibility, and simple mistakes like sending funds to the wrong address prove costly as they are irreversible.
Blockchain startup Kirobo offers a novel solution in this regard to protect cryptocurrency users from human error. With support from the Israel Innovation Authority, it has developed an additional logic layer for blockchain protocols like Bitcoin and Ethereum. This feature, known as Retrievable Transfer, is suitable for individuals, custodians, exchanges, and wallet providers wanting to incorporate further transactional security measures.
The solution acts as a third verification step, helping users avoid losses from transaction errors by requiring senders to add a passcode to their transfer that must be matched by the receiver before funds are released. Until the recipient enters the correct code, the sender can cancel and retrieve the funds, mitigating any such errors.
Uncertainty in the task of crypto self-custody and a lack of understanding surrounding crypto-native services causes concern regarding the secure holding of assets. When it comes to the custody of crypto investments, the loss of private keys, which act as a digital key to unlock the safe containing assets, can be disastrous. While self-custody is viable for some, traditional investors used to custodians for managing assets have sought similar solutions in the crypto space. They’re seeking a solution that can provide the levels of security that they are used to, and in large volumes.
Traditional payment platform Skrill has been operating an online payment and money transfer service since 2001. Skrill began offering a fiat-to-crypto gateway in 2018, providing a simple yet secure way for its existing customer base to convert 40 different currencies into Bitcoin, Ethereum, and other digital assets. It further expanded its operation this year to provide direct crypto-to-crypto services too.
Skrill operates a custody service for crypto, taking on the responsibility of managing private-key security for users via a network of approved custodians. Its reputation in the traditional payments and money transfer market provides peace of mind to investors who prefer to leave the security of such assets in the hands of a qualified custodian with a history of financial integrity.
Breaking Down Barriers to Entry
Solutions to the most cited concerns surrounding digital asset investment are closing the gap between legacy and crypto financial services, helping to break down the remaining barriers to entry in the market.
A combination of these services can now be deployed by investors, allowing access to the utility and growth potential of this nascent space while reducing the associated risks.