In the 1988 action film Die Hard, a group of heavily armed German terrorists attempt to steal $640 million in US government bearer bonds from a Japanese financial firm. The plan of the heist, had it not been foiled, would have been to steal the bonds, then redeem them for cash at the US Treasury.
How is this relevant to cryptos, you may ask?
Because cryptocurrencies, like US government bearer bonds, are bearer instruments. In simple terms, a bearer instrument is an object that entitles the holder the rights of ownership or title to the underlying property. Cash, gold coins, and iTunes gift cards are further examples of bearer instruments.
Transferable digital scarcity
This bearer instrument attribute is the innovation behind cryptocurrencies. With the invention of Bitcoin, the world’s premier cryptocurrency, a scarce digital bearer asset can now be transferred electronically from one holder to another. This revolutionary technology gives the holder (bearer) complete monetary sovereignty over his or her wealth. But such freedom comes at a cost, and if the underlying responsibility of this freedom is not fully respected, holding a digital bearer asset can lead to financial ruin.
Like any bearer asset, cryptocurrencies can be lost or stolen. Gold bars can be permanently lost at sea, and duffle bags full of cash can be robbed at gunpoint. But unlike the German terrorists in Die Hard, stealing crypto doesn’t require locking down a building and threatening its employees. An anonymous hacker halfway across the globe can remotely steal your crypto, and odds are you won’t even realise that a theft has taken place until well after the fact.
Even without outside interference, losing your crypto assets can be as simple as misplacing or forgetting your crypto wallet’s password. And once lost, cryptocurrencies are irretrievable. It is for these reasons that extreme care must be taken when storing and transacting in cryptos.
Beware the wild west
The cryptocurrency market is for the most part unregulated. It’s the wild west of the investment world, and is rife with bandits and conmen looking to separate you from your hard earned money. As the digital honeypot grows, these online attackers will become increasingly clever in how they attempt to rob uneducated cryptocurrency holders.
Cryptocurrencies have provided what some would consider unreasonably high returns for investors in the past, and are still more than capable of offering tremendous value. But regardless of what may result in the future, anyone ignoring the very serious, yet often forgotten risks that come with holding any kind of bearer instrument does so at their own peril.