Before You Dive Into Cryptocurrency’s Deep End, Learn What It Takes To Swim
Cryptocurrency is all the rage right now. I’m sure you’ve heard your friends talking about it, seen dozens of articles online, and even heard about it in the news. That’s because everyone is buying into the crypto market — from large corporations to tiny startups to individuals looking for an explosive investment. It is also the payment of choice for cyber criminals, leading C-Level individuals wondering why.
But what is all the buzz about? What is so special about crypto and why is everyone considering investing in it? Why do criminals prefer it? If those are some of the questions you have, then you’re out of the loop.
To help you get into the loop, this article will explain all you need to know about cryptocurrencies.
What Is Cryptocurrency?
A quick definition is that cryptocurrencies are electronic peer-to-peer currencies. In plain English, that means people trade these digital assets without the scrutiny of any central authority. Unlike fiat currency, you can’t put a Bitcoin or Ether in your wallet and pull it out when needed. It only exists as a digital record, a line of code, if you will.
How Do Cryptocurrencies Work?
In a nutshell, cryptocurrencies use blockchain technology to carry out transactions.
What’s blockchain? It’s a complex technology that is hard to explain in its entirety. But the basic principles are simple. Just think of it as an open, distributed ledger that records transactions in encrypted code. The code is recorded in “blocks” that are linked together on a “chain” of previous cryptocurrency transactions.
In practice, it is like a ledger — each page is like a block and the entire document is like a blockchain — one that is distributed across countless computers around the world. Each of those computers maintains a record of the entire ledger and they are constantly compared and reconciled to prevent anyone from editing or writing fake entries (in other words, hacking).
So whenever you make a transaction, the encrypted code for it is stored in a blockchain that is downloaded by every user.
Cryptocurrencies are only one application of the blockchain technology. Other applications include real-time IOT (internet-of-things) operating systems, immutable record books, supply chain monitoring, and financial services like quick loans and saving accounts.
Is Cryptocurrency Safe?
Yes, and No.
Thanks to the decentralized and public nature of blockchain technology and the encryption process every transaction undergoes, cryptocurrency is inherently secure.
The safety cryptocurrencies provide is actually one of the main reasons why people consider it a better choice than the current system of transferring money. Contrary to popular belief, Bitcoin transactions are actually trackable, as proven by the recovery of funds in the Colonial Pipelines ransomware incident.
On the flip side, the storage of those Bitcoin that you own becomes a real issue.
How Can I Buy and Store Cryptocurrency Safely?
Purchasing: Unfortunately, cryptocurrency scams are now a popular way for scammers to trick people into sending money.
Most scams are operated via a text message or email that asks you to make a payment through Bitcoin or any other popular cryptocurrency. When you make the payment, you don’t receive the promised goods or services. Unlike a credit card, cryptocurrency transactions are final and there is no option to reverse or cancel them.
Another popular scam involves exchange systems that offer cryptocurrencies for much cheaper rates than the market average. If you come across such an exchange, remember the age-old saying, “If it seems too good to be true, it probably is.”
So you also need to be careful about who you’re buying from. We recommend using only regulated platforms like Coinbase.
Storage: The safety of your cryptocurrency depends on the safety of your device or your online hosted wallet.
While the Bitcoin network has proven to be bulletproof so far, your personal/work systems and online hosted wallets are far from safe or bullet proof. There have been notable hacking of large hosted wallets, leading to thousands of people losing millions of dollars in bitcoin, to the extent that the list of remaining reputable online wallets is growing shorter by the day. If you store your wallet on a mobile or PC/Mac device, you then run the risk of a hacker gaining access, or the device dying and taking your investment with it.
Likewise, people who have used bitcoin to pay hackers have found themselves contending with the hackers denying reception of payment and extorting extra monies from their victims.
Investing in cybersecurity systems/cyber defense practices, aggressive backups, and layers of due diligence, become the only way to mitigate these risks. If you’d like more information on Optistar’s cybersecurity solutions for your organization, contact us or request a 30 minute consultation with one of our Senior IT Consultants.