Interest in cryptocurrency is growing. But cryptocurrency cannot be bought at the nearest bank branch. Billions of money are stored in this way.
Bitcoin is the most famous cryptocurrency in the world. With it, a market cap of several hundred million dollars has long been a serious investment. But, the peculiarity of Bitcoin is that it is completely decentralized. So, it is not only issued by a bank but can also be acquired by investors at a branch on the spot. But how safe is bitcoin trading? Using datum is also popular, but inferior to bitcoin.
Bitcoin should be understood as an algorithm that is generated by a computer and can only be traded on the Internet. For a long time, Bitcoin and all other cryptocurrencies were in a dark corner, as the anonymity offered was often used for criminal purposes in the early days. Thus, purchasing bitcoins has been difficult for a long time and always comes with certain risks. How to trade bitcoin safely? How safe is a bitcoin trader? This article will share all the features of the security issue.
Is Blockchain Secure?
The term blockchain describes a decentralized database. Every user who is part of this blockchain network has the entire database with all information chains or excerpts from it. The blockchain works like a kind of public land register or a digital bank statement for transactions between computers. It is the technological basis for cryptocurrencies such as bitcoins. How to trade bitcoin and is it possible?
Since all miners in the network using the software have a complete copy or part of the entire blockchain, they can check for themselves whether all parties involved in a transaction are working with the same version of the blockchain. This eliminates the need for an external and central supervisor to review transactions. But, this results in the challenge for everyone involved to always create a common database. A consensus algorithm is used for this. In the blockchain, the network participants always agree on the longest available blockchain.
With the blockchain, transparency, and decentralization users must store identity and property. So that it can be seen who is sending which bitcoins to whom, for example. However, the identity behind an address remains unclear. In a figurative sense, one could say: The Internet is a “network of information”, the blockchain a “network of trust”.
The technology is considered to be very promising because the information in a blockchain is stored and distributed across many computers. This means that they can only be manipulated with enormous technical effort.
How safe is bitcoin investment? Can you trust websites? The information in the data chain is protected against manipulation. As soon as someone tries to change it afterward, this is noticeable because all data records are based on each other like chain links – hence the name. If something changes in this chain, it no longer holds together, to put it, because the bond no longer fits.
General Cryptocurrency Risks
How secure is cryptocurrency? For a large part of the population, cryptocurrencies are still a book with seven seals. As in traditional banking, a key success factor is the creation of a culture of mutual trust.
- Cyber attacks through security holes.
- Legal and compliance risks of mining cryptocurrency due to legal uncertainty due to a lack of proper legal definitions or classification by supervisory authorities (legal conflicts regarding money laundering and suspected fraud).
- Loss of confidence among the general public.
- High volatility in price development.
- Endangering the stability of the financial system.
- Use by criminals for illegal business.
- Blockchain capacity problems.
Recently, companies working with cryptocurrency have begun to resort to tightening control over their users’ funds much more often. For example, on February 12, Tether, the issuer of the USDT stablecoin, announced the implementation of the same instrument from Chainanylsis. The same solution is used by the Bittrex, Bitfinex and Binance exchanges.
In recent days, many cryptocurrency platforms have become seriously concerned with the issue of strange transactions and with what money the digital coins were originally purchased. As a result, this can alienate users, because the exchange may not give a choice: stay or leave, and the proceedings take a lot of time.
Attack on Crypto Exchanges
Is there an attacking threat? Is it possible to steal cryptocurrency? Since October 2018, the process of following incidents has become known that are suspected to be malicious attacks.
- Binance: With Binance, one of the leading crypto exchanges was hacked in May 2019 through a combination of phishing and malware attacks. The hackers received a large number of multifactor authentication codes and API keys. With this, they transferred 7,000 Bitcoin (BTC) worth around 41 million dollars to their own wallet in one transaction.
- GateHub: On June 6, 2019, GateHub announced that $ 10 million in the cryptocurrency XRP had been stolen in an unknown manner via the Wallet API. All API requests used valid access tokens. However, it is unclear how the attackers got access to the secret tokens.