Pratima Harigunani
They may have not all the ducks in the row yet but hardware players have started making sense in a software-dominated world that struggles with storage, mining and security
Solutions like Phoneum, Electroneum and Pundi X could have sounded out of place for their heavy hardware accent but with time (and new problems) gaining pace, it is time to get used to the idea of saying cryptocurrency and hardware in the same breath. The formats can vary. It can be a hardware wallet, a mobile that mines cryptocurrency, a smartphone specially designed for crypto or a point-of-sale solution that is based on blockchain – but the drift is the same – hardware is not just some backyard waste in this industry, anymore.
We have just seen Litecoin Foundation announcing a hardware wallet in collaboration with Ellipal, best known for making crypto-compatible smartphones. Just an example of what a report from TokenInsight spelt out recently. The ‘ 2019 Q1 Research Report on Digital Wallet Industry’ shows that over 700 wallet projects have been established by April 2019 and in terms of user visits, the Q1 average UV of hardware wallets is 6,800/day, which is 1.6 times that of software wallets.
Of course, when we slice the space from the angle of wallet types, the ratio of software wallets to hardware wallets in the current market is 8:2.
We are talking about a quarter where the number of wallet users now exceeds 34 million, reflecting a growth rate of 9 per cent compared with the previous quarter.
There is no denying that software weighs heavy on the long tail effect. Hardware and software have their own strengths but it is crucial to hammer them on the right nail at the right time.
If not safe, saf-er. If not best, bett-er
Do you know that a major growth driver of the global cryptocurrency mining hardware market is nothing else but a spike in demand for cryptocurrency-specific hardware?
We are witnessing vendors betting investments in research and development for developing innovative technologies and new products.
The quest for improving the hash rate, making mining efficient and reducing power consumption is high right now.
That is what analysts see when they augur that the cryptocurrency mining hardware market will register a CAGR of over 10 per cent by 2023 (as per a prognosis by Reportlinker).
Hardware, it turns out is quite a strong card in changing the game ahead in an industry that is nothing short of a gamble right now. And why not?
Peko Wan, Vice President, Pundi X explains how hardware plays an essential part for mass adoption. “It empowers the operation of blockchain as well as enables the mainstream adoption. Take Function X blockchain, for example, XPOS, Pundi X’s blockchain-based point of sale smart device which operates both as a decentralized point-of-sale device and as a node. As a node, the XPOS helps confirm the transitions which contribute to the operation of the decentralized network. As a point of sale device, it facilitates crypto transactions as easily as buying a bottle of water.”
The aspects of security and mining also tilt the scales strongly towards hardware. Recall that the Litecoin wallet is supposed to be a completely connection-free cold wallet isolated from any network.
Yes, most of these wallets are well-pronounced on safety, at least in the descriptions. Hardware wallets have physical buttons for transaction confirmations and hence a reduced vulnerability to hackers (at least, lesser than that of software wallets). The Token Insight report underlines the security condition of wallets. It feels that for technical risks, there are mature solutions to the randomness of private keys, secure storage and use risks. But if we consider artificial risks, many effective solutions are available in hardware wallets to defend against security risks.
At present, mainstream security authentication methods culled in this report were: static passwords, bio information authentication, graphics unlocking, Google two-factor authentication and dynamic passwords. “Among the 234 software wallets from our statistics, 136 wallets have acquired this data, and the proportion of wallets supporting PINs remains the highest at 26.9 per cent.” The report pointed out.
Look at user experience side of digital currency payments, and you will observe that the transfer of encrypted tokens is enjoying more speed, application scenarios and credibility with the emergence of digital asset debit cards, among other things.
A blockchain-powered phone which allows users to make calls, send messages, share content via blockchain, taking blockchain application beyond the financial transactions is another case in point. “Pundi X’s XPhone presents a friendly interface making consumers aware of the blockchain technology,” Wan emphasizes.
Ware next?
So looks like hardware has finally cracked the needs of ease, pervasiveness and security that the blockchain industry was wrestling with.
Or not?
The ReportLinker analysis reminds that fragmentation is something that is still a soft spot in the hardware market.
As Wan from Pundi X contends, when asked about scalability and practical weight of hardware innovations: Crypto smartphone is a way to make the mainstream consumers be aware of the use of cryptocurrency. “The adoption of new technology takes time. As technology advances, the adoption of crypto should take off. We see leading device manufacturers explore the potential of this market.”
It would help those players build up on the natural edge of hardware by innovating in the right places. A TokenInsight IT Services report dissected that there are more platform-based projects in the industry and that their average market value is higher as well. But the application scenarios in the application category are clearer, and the entry point for solving the problem is smaller.
Cloud was first an odd sound in a server-heavy enterprise market, but look at how it upended everything in a matter of a few years. Hardware could be the Netflix of blockchain space too, provided it is switched on when the iron is hot.
Imagine what can transpire when the hardware is struck right, loud and well. There is a lot that needs to be lifted in the blockchain yard. Things can turn simple and secure if we get the right cranes. And as to software, we might just have fewer sitting ducks.
