The value of Bitcoin has made trading in cryptocurrencies a desirable investment for many.
Several cryptocurrency assets are available for trade today. Do you invest in any of them? With the skepticism surrounding Bitcoin prices repeatedly rebuffed by the workings of demand and supply, and prices varying as do other assets, cryptocurrency trading has emerged as a viable investment for the savvy minds. And risk takes.
Unfortunately, there remain questions in the minds of regulators, investors, traders, supporters and opponents all over the world are; Is trading cryptocurrencies safe? Can they or the platforms be hacked?
Cryptocurrencies are a class of digital financial assets issued and accepted as the medium of exchange for online communities. However, they have grown to adopt a more varied applicability in the years since. It has been seen by many experts as a disruptive financial technology.
Cryptocurrency is intended to make global transactions easier, faster and more secure. This is by placing control in the hands of the concerned parties.
Block -Chain the Underlying Technology
To better evaluate how secure cryptocurrency is, it is vital to understand the underlying technology known as a blockchain. It’s is defined as an online-distributed ledger that records data in hash functions with timestamps. This is so that data cannot be changed or tampered with.
The use of data structures ensures ease in the way we transact. The blocks are stored in an anonymous way within a network. This ensures that they are no centralized points of vulnerability in which cybercriminals often target.
What is unique about block-chain that makes it so powerful?
The power of blockchain is not in its ability to repel attack because it is impossible anyway. It is the redundant nature of the distributed ledger technology. A ledger is a record of transactions.
While a distributed ledger represents a ledger that has been shared with a community or public for verification and audit. In the blockchain, the block represents a number of transactions that are bundled and added to the chain.
Distribution of the block to all mining nodes in a network happens before any block is added to a chain. This is to determine the validity of the transactions. Further, every unit of cryptocurrency can be traced through the chain from transaction to transaction to the origin of its mining.
Every node on a network acts as an independent operator and third-party auditor. If even one of them rejects a block it becomes invalidated.
What is the risk?
Having said that, the risk for cryptocurrency investors and traders is still plenty. At the end of the day, we talking about real money irrespective of the form. This simply means that it attracts criminals as there is motivation in the form of value and money.
There is no denying that blockchain and altcoin are reasonably safe from hacking. However, you still need to connect to the internet to sell and buy. This internet connection will be the target for hackers. They are keen to watch out for traffic. This is in search of the sites traveling to and from the money sites.
Once a connection is established on the internet, one will have to link their bank/credit information. After linking, for an exchange one has to make a transaction and that will put your data at risk.
Added security features
One may argue that most exchanges use two-factor authentication however even that is not un-hackable. If all goes without a hitch one has successfully set-up an account. Are they then ready to purchase altcoins? And where should you hold it?
Online exchanges are vulnerable to hacking as evidenced by Bithumb’s break-in early in 2017. It was reported that 30,000 customers’ information had been comprised and further $1,000,000 in cryptocurrency had been stolen. To avoid holding your altcoins on an online exchange you could use an offline computer-based wallet. This would mean more download of software to your device.
In addition, storage of the cumbersome list of security questions/responses and the risk of personal attack. The final step to ensure the safety of your altcoins is cold storage. This implies holding your coins in an encrypted file on a memory stick. This assures safety from attack however, the risk of degradation, a stray magnet, damage/loss is still imminent.
Unfortunately, the risks do not end there, the risk of falling to scams and fraud on cryptocurrency still exists. Initial Coin Offering (ICO) is an example of a new blockchain to get funding at the start-up level. There are those that are legit but in most cases they are fake. Furthermore, their only intention is to get hopeful investors and traders to send altcoins to their anonymous address.
Cryptocurrency and security
In conclusion, every new invention or innovation has its associated concerns related to security and mass adoption. Cryptocurrency as an evolving development in the fintech industry has its own set of security and legal concerns.
However, as more and more people and companies across industries are adopting cryptocurrencies. There is a need for more security shields creation and deeper investigations into every cryptocurrency. Their uses and benefits being carried out.
To protect your investment, we recommend you familiarize with the workings of financial markets before committing your funds to buy a given crypto-asset. It is even more rewarding to work with a qualified professional.