Security and Risk Management in Web 3 and Blockchain – Observations and an Individual Journey.

In my last article, I related how a combination of relentless dedication, good timing, and admittedly, a bit of luck, brought me a massive improvement in virtual assets, all within the space of a few hours.

Some assets may match our core objectives, some may need to be disposed of.

Hardware aka ‘Cold’ custodial wallet.

When I had not too long began to explore the world of Web 3 domains, one of the most popular and user friendly mechanisms used to participate in domain auctions by accessing the Handshake blockchain core developed a fault.

The catastrophic failure of the system left many people with considerable holdings without access to their assets for about two months.

I’ve since managed to get access to a ‘node’ with simpler architecture and features. It has collapsed twice, though it is easier and quicker to recover.

It’s clear to me, that the business can’t keep operating continually on a mix of online node/staking  systems, wallets and exchanges to distribute assets. While it removes a single point of failure, something more robust is needed to secure assets whose use is not imminent.

Hence the Ledger Nano X, which was recommended by others in the ‘Community’, though I have also heard Trezor products are also good.

Good to point out that any solution like this is CUSTODIAL. That means that if something goes wrong, the loss is on you. Take great care of the device itself and any keys needed to unlock it. Ultimately this is just a very specialist type of storage media, and any come back against the manufacturer will only indemnify the value of the device itself, not what was stored in it.

It is however leagues ahead compared to online solutions, which in addition to system failure, can also be hacked, or if a commercial entity, can file for bankruptcy.

Don’t Speculate on blockchain or digital assets.

On one occasion when I was based in a hotel working in Nigeria, there was a beer parlour across the road from the hotel gate, and two doors down, there was a ‘Bet9ja’ outlet. Any time I was at the hotel, I noticed the same dishevelled individuals of miscreant appearance shuttling between the beer parlour and the Bet9ja. I’m not sure how they got their money, but life was obviously not improving, because I never saw them upgrade to Armani suits and car with driver.

The problem with any kind of speculation is that if everyone could make money guaranteed, without adding any value to the asset whatsoever, then everybody would be doing it, and everybody would be rich. But they are not.

If somebody takes money, buys a hammer and a chisel, gets a piece of rock, fashions it and sells it, then the hammer and chisel are ‘investments’. But they have applied their own special skill to hone an otherwise useless piece of rock into something of increased value. This is ‘investing’.

Many however claiming they are ‘investing’ are actually not materially interacting with their ‘asset’ at all, beyond two things, deciding when to buy, and when to sell.

They will generally make small gains for a while, buying and selling between small fluctuations on an overall upward or downward trend, then some unexpected inflection point will be reached which will get them out of position, and they are either stuck with their asset beyond use, or they take a huge loss.

‘Another great evil arising from this desire to be thought rich; or rather, from the desire not to be thought poor, is the destructive thing which has been honoured by the name of ‘speculation’; but which ought to be called Gambling.’ – William Cobbett

It is important to purchase blockchain assets only if you need them as a means to get something else, such as utilities built inside a blockchain ecosystem, or, you are going to do something to materially add value to them through individual intervention.

People who want to build online followings will say different… but forget all the graphs and the stories about what someone did ‘When Bitcoin was $10’ – that ship has sailed.

For those hell bent on a life choice in that direction, just wait until I have time to be in that part of Nigeria again, I will show you the beer parlour and the Bet9ja. I won’t even ask you to follow me on LinkedIn!

Speculation Resilience of Handshake Ecosystem

The Handshake coin (HNS) is a functional/utility coin to drive the activities in the ecosystem, such as trades on its Web 3 domains. Typical market cap in the last 3 months has been around $12m with daily volume at around $20-40k.

This makes it extremely resilient to speculators as its fairly impossible to buy up large $value of the coin. While the coin is now around 0.022 off a high of 0.85, low volume would escalate the cost of an unconditional order for say, 500k coins fairly quickly. The speculator may get the first of 500k coins for 0.0022 but as the exponential curve of cost gains steeper gradient, they could very well end up paying $2k for coin number 500k. Once secured, the speculator would experience the reverse exponential curve price collapse if they decided to sell.

By comparison, Bitcoin has a market cap of over $320 billion and Ethereum is on around $150 billion. These much higher market caps can support speculation far more easily.

Staking Options for Retailing SLDs (Second Level Domains) off Handshake

A staking option involves a TLD owner, such as 9ja Cosmos going to a Staking Agent. This is a security guarantee for the end customer which could be simplified by comparing it to a bank guarantee. The TLD owner puts a fee (in HNS) with the Staking Agent, and it is held beyond use.

The Staking Agent then arranges a hosting/SLD sales retailer. Any contract for an SLD moving forward is with the retailer and not the TLD owner, or the Staking Agent.  The fee (stake) is a limited deterrent from the TLD owner rug pulling on the SLD customers. If the TLD owner withdraws the TLD by removing the nameserver links with the SLDs, they lose the stake.

Web 3 domain investments are not speculation.

The current spate of extraordinary collapses in the crypto exchange world is down to enthusiasm being driven by greed, and insufficient due diligence being done by VCs, investors, or their agents.

If something appears too good to be true, then it generally is.

This has absolutely nothing to do with Web 3 Domains.

There are currently a wide range of costs and complexity associated with owning a Web 3 domain, depending on whether the client/customer wants a whole TLD to themselves, or just wants an SLD. Prices also vary across providers.

Once thing is certain, which is that as use cases become more simplified and more management tools appear, these Web 3 domains are going to rise in price significantly.

With the decentralization that is inherent in their blockchain credentials and the realization of their multiple use cases, they are going to be necessary for many individuals, particularly those self-employed or with a side hustle, and they definitely will be necessary for businesses.

It makes sense to come in now, early and relatively cheap, make mistakes, learn and become familiar with the technology. It would be imprudent to be a late adopter while competitors who have mastered the implementation drive business and gain commercial advantage.

That said, just as there are dangers in speculating with cryptocurrency, and there are dangers accumulating tokenized/NFT digital art collections with the expectation of selling at a premium, it would also not make sense to get ‘collectors instinct’ about Web 3 domains.

The moderate and sensible approach is to have restraint in the acquisition of any blockchain assets, with a focus on use case.

Buy cryptocurrency only when there is an immediate need to use it in trade, or to operate in a blockchain ecosystem. Offer it as a means of payment to make trade with you easier for customers.

Collect digital art if you have passion for it and can comfortably afford it, rather than buying it in the hope it will appreciate in value.

Similarly, it is probably advisable to only purchase sufficient Web 3 domain(s) consistent with the perception for future use.

9ja Cosmos is here… Get your .9jacom and .9javerse Web 3 domains  for $2 at:

https://www.encirca.com/handshake-9jacom/

https://www.encirca.com/handshake-9javerse/

type mydomainchoice.9jacom or mydomainchoice.9javerse in the vacant field and proceed.