In traditional money systems, users have gotten used to multiple forms of securing funds that now seem natural. These methods have been taught from our first piggy bank as a kid and first real bank account as a teenager. These feel natural now, but have never been “natural” and required training and learning. In fact, your first bank account was probably a joint account with your parents so you don’t do something crazy like spend everything on candy. When a new technology like digital money comes around, people are required to relearn these methods of securing funds. These new systems are quite different than current systems and in general people don’t like to change something that seems to be working (if you enjoy high fees, lack of control, and huge delays in moving your money!). (This article uses the term “traditional money” to represent normal cash money like US Dollars, other International money, Fiat, etc and uses “digital money” to represent a number of terms that may be unfamiliar and technical like blockchain, cryptocurrency, tokens, digital ledger technology (DLT) as well as specific digital money like Bitcoin, Ethereum, Ripple, EOS, Tron, IOTA and others. In addition, this article focuses on EOS digital money system, however it could apply to others.)
First we should layout the current forms of securing traditional money and compare to the digital money approach so we can have comparable methods for everyone to understand. The table below shows both traditional and digital money methods for securing money from least secure to most secure, then will go into descriptions of traditional versus digital money.
Starting at the top of the table are the least secure methods of holding money. In traditional systems, you go to the ATM machine and move money from your secure bank account into your physical wallet or purse. You know that this is not very safe, as you could get mugged, lose your wallet, or get drunk at the bar and spend all the money buying drinks for everyone 🙂 . So you only move the amount of money you need until your next visit to the ATM. You also carry credit cards in your wallet or purse for slightly more secure money since its harder for a mugger to extract money from a credit card, but of course it makes the bar binge even worse!
On the digital money side, you need to setup a digital wallet on your mobile smartphone to send money to friends or buy goods (however few merchants support digital money currently). Most people are reluctant to use digital wallets for fear of losing their phone which could give access to someone that finds or steals your phone. So currently, even among digital money enthusiasts, digital money is not used on a regular basis outside the home computer. Smartphone companies have been discussing more secure digital wallets but not much is available right now. Tipit.io is a solution to this as discussed below.
The next level of securing money is home access. Traditional approach is to keep some money at home which is locked and mostly secure in a drawer, piggy bank, safe or under the mattress. This is more secure than your wallet or purse since your home is locked and you would adjust the amount you keep at home based on the amount of break-ins in your neighborhood.
On the digital money side, you would use your PC or laptop to securely hold your digital money or use a hardware device such as the Ledger Nano. These approaches are ok, but still have fear and risks as you could lose your laptop, PC, or hardware device. The hardware device provides a set of 24 random backup words that you can use to recover your wallet, but then the question comes of where to store the paper copy of these backup words? If someone gets hold of your backup words they get access to all your funds. I’ve been in the crypto space for a couple years and this still doesn’t feel safe enough.
The next level of securing traditional funds is with bank and investment accounts. In both of these cases, a separate institution makes ALL the rules including the fees they charge, the interest amount they give or don’t give, how you access your money ($3 fee at ATM), and THEY use your money for THEIR investments. Banking has been around for a long time, so laws are in place to protect and insure your money. However, the reality is anything could happen like the 2008 crash, the Saving & Loan crash of of the 80s, the Great Depression, and the current money devaluation in Venezuela with a 1.7 Million% inflation. You also need to decide how much money to keep “liquid” in the bank versus investments. There are quite a bit of fees and long delays for moving money around in the traditional system such as fees to transfer, fees to buy stocks and fees for mutual funds including some that have up-front load fees.
To have secure digital money, you would use a hardware wallet plus add additional security. With EOS blockchain you can “stake” your money which freezes the digital money for 3 days. Then you setup email alerting capability to notify you about all transactions. Thus if a hacker gets hold of your private keys, they would first unstake all the money and you would be notified giving you 3 days to take corrective action such as changing your private keys.
Super secure funds in traditional systems include safe deposit box in a bank. First you go to the bank, get physically identified, and enter the vault safe. The banker and you each have a key to open the safe deposit box. Cash money in a safe deposit box is not (FDIC) insured but possibly protected from bank default (if they will still let you into the vault).
In some digital money systems like EOS, you have support for multi-signature. Multi-signature is very flexible allowing multiple digital keys to open or use the digital money. Multisig can be programmed anyway needed for the situation and could give even greater security than a safe deposit box for digital money with no ongoing cost except the initial time to set up. Details of MultiSig are beyond the scope of this document, however this would be the current best way to super-secure your digital money.
In the future, it’s expected that smartphones will add hardware wallets allowing funds to be secured through your phone to handle all levels of security with one solution. When these become available and verified secure, it could make blockchain/cryptocurrency secure at all the levels with a single solution for everyday access to bank-level security and even be one of the solutions for the super secure method, possibly along with verifying from another key on your laptop, PC, or hardware device like Ledger. So in the future we should see a single solution on a smartphone to handle all digital money security along with holding some funds in a super-secure account using multi-signature using your smartphone plus one other approach. This will eventually make digital money more safe and secure than physical wallets, banks and safety deposit boxes. Of course, since your smartphone is handy, it STILL won’t solve the bar binge!
Introducing Tipit.io, a simple solution available NOW for everyday use of digital money for rapid expansion into the mainstream.
Tipit is a solution meant for everyday use of digital money without special hardware or software. Tipit allows transferring digital money to friends and family, tipping your favorite providers and artists, paying for goods at stores, airdropping new digital money tokens (similar to stocks in companies), and having social fun with digital money transfers. Tipit is as secure as your social media services like Discord, Telegram, Twitter, SMS, FaceBook, and email so it is not meant for fully secure holdings like in your bank, hardware device, or safe deposit box. Tipit is meant for daily use like your physical wallet or purse.
Here’s how version 1 Tipit works on Discord (with other social systems coming in version 2):
- First, get your Tipit account seeded with digital tokens or money:
- If you are new to digital money, reach out to Tipit team on our Discord channel and we will send some digital tokens to play with or try asking people on your Discord channel running Tipit. If your Discord channel is not running Tipit, have the Discord server admin reach out to Tipit on Discord and we will get it setup, typically within one business day.
- If you have EOS digital tokens, you first deposit tokens into the Tipitaccount. The best way to deposit is through your Discord account and running the following command wherever Tipit is running:
- !deposit =>This provides a link to the Tipit website with your Discord information allowing you to deposit properly into your Tipit account. This requires Scatter to confirm the sending of tokens from your account to the Tipit account.
2. Your funds appear immediately which you can see by sending the command !bal in Discord. This sends you a direct message with your balance within Discord.
3. Sending funds to friends, family, artists and merchants is extremely simple and instant:
!tip @DiscordUser # token any message you want
!tip @markstair 1.1 EOS Thanks for setting up Tipit on our channel!
4. Withdraw of funds is also very simple and instant using !pull or !withdraw commands:
!withdraw EOSaccountName # Token (supports !pull or !withdraw)
!pull joy2theworld 1 EOS =>Transfers 1 EOS from Tipit account to EOS account called joy2theworld
In the longer term, Tipit is a replacement for Venmo, Paypal, Patreon, Checks, ATM, Point of Sale, Western Union, Bank money transfer like Zelle and Credit Cards like Visa, MasterCard, Amex, and Discover. Yes, this is a bold statement and we are working to make it happen now. To achieve our vision, we first need to help mainstream users adopt and be comfortable with using digital money by providing simple solutions like Tipit that drive mass adoption without the huge learning curve of digital money. We do this by enabling EXISTING social systems like Discord, Telegram, Twitter, SMS, email, Slack, FaceBook, and more to be enabled for easy digital money transfer. We also allow ANYONE to receive tips and digital money even if they know nothing about digital money. Once people have enough digital money to notice and be excited about, they can get a digital money account and withdraw funds from Tipit for long term secure holdings and investments.
Tipit is working towards a BETTER Future. A future where banks and credit card companies don’t extract your fees, a future where YOU control your money, a future where funds are transferred in less than one second rather than waiting 3 days, and a future where EVERYONE, EVERYWHERE can participate and invest without approval by central authorities like banks, credit card companies, stock exchanges and governments.
Related Stories from DDI:
- Why Data will Transform Investment Management – Data Driven Investor
- 5 Real World Blockchain Applications That Are Transforming Industries – Data Driven Investor
Comparison of Securing Traditional and Digital Money was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.