Cryptocurrencies are digital currencies built upon a blockchain network that have real values measured against regular fiat currencies and can be used as regular money in storage, investments, and even payments. They mostly used decentralized technology, and are usually heavily encrypted such that it is really hard to create counterfeits or steal.
Aside from tech-based stock options, cryptocurrencies are the next big thing in the market, and they are relatively safer and better options to invest in as their values have been predicted to increase in the coming future.
There are several hundred forms of cryptocurrencies in the world today. The first cryptocurrency, developed in 2009 by Satoshi Nakamoto is known as bitcoin. All other forms are referred to as alternative coins (altcoins) because they are developed in the image of bitcoin, aiming to improve on its weak points and surpass it in popularity and value.
Current security risks associated with storing and trading cryptocurrencies
Although it has been termed as the future of currencies, there are still some risks associated with using cryptocurrencies, some of which are highlighted below.
- Theft: the most common risk associated with anything. Although these currencies are typically highly encrypted, cybercriminals have continued to up their game with regard to stealing cryptocurrencies off people. Be it hacking the wallet address and gaining access, or putting malware on compromised websites which infuse malware into the device and mirrors the user’s screen, or intercepting transfer payments of cryptocurrencies.
- Value instability: the most common characteristic of any digital currency is the uncertainty that comes with its value at any given point in time. Using bitcoin as an example, within 8 years of its inception, the value rose from $0 to $20,000 per unit. Six months later, the value significantly dropped to $6,000 per unit. As of right now, the value of one stands at roughly $11,000 per one unit, which implies that if you buy at a high point and the value significantly decreases, you make a loss.
Ways to stay protected
Given the previously mentioned risks, here are a couple of ways to safeguard yourself from several problems associated with using cryptocurrencies.
- Use different Wallets: If you deal in several and heavy amounts of cryptocurrencies, it is advisable to spread them across several wallet addresses for keeping; so that in a case of password theft, only the amount kept in that wallet will be lost instead of the whole merchandise.
- Use Strong Passwords: Another way to protect oneself is to use strong passwords for all wallets, consisting of alphabets – upper and lower case, numbers, and special keys; and most importantly, to use different passwords instead of one in case of account breach of one.
- Financial Service Providers: If you’re skeptical about making use of wallets altogether, be it downloaded or electronic, there are now online services that enable you to spend, receive, and store cryptocurrencies like regular money. There are some services that even provide ATM cards, such that it can be withdrawn as your country’s native currency. This service is however more popular with bitcoin, due to its high usage.
- Use VPN: Using a VPN on your devices, does more than just masking your IP address, especially when making online payments. It also encrypts your information as they are sent from your device to the server. The cost of getting one is definitely insignificant compared to the amount that could be potentially lost in the event of data theft.
- Patronize Trusted Services: Given that a lot of people are going into the cryptocurrency sector, several fraudsters have started developing phony online Defi companies, creating awareness, gathering several subscribers, and closing down the service; absconding with several million. It is however wise to patronize more popular and grounded cryptocurrency options if you have a low-risk tolerance.
Although projected to lead the world of tech and finance into a promising future, making use of digital currencies poses several risks, which is why it is imperative to stay updated on ways to safeguard ourselves using the aforementioned tips