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Cryptocurrencies are popular digital currencies. With different ways of tracking transactions, determination of value, and ways of storage, there can be a learning curve when it comes to safe management and use of crypto compared to other forms of digital money.
Cryptocurrencies like Bitcoin and Ethereum, for example, were created to be decentralized — so they're not issued by traditional banks or governments. Instead, payments are verified and tracked by blockchains.
Factors like decentralization and crypto’s inherent digital form make it important to understand the security factors and potential safety risks associated. This article will help explain the ins and outs of cryptocurrency security, including some potential safety risks and considerations when buying and selling crypto.
Cryptocurrency uses cryptography to help securely encode and protect payment information. Instead of something like a bank account number, cryptocurrency wallets use private keys — or alphanumeric codes — that are used to make payments and authorize transactions.
Cryptocurrency is also secured by blockchains — which function as digital ledgers of all cryptocurrency transactions. Many blockchain ledgers are typically verified and maintained by a peer-to-peer network of computers, potentially helping to increase transparency and accountability.
Even with these built-in protections, there are potential risks associated with cryptocurrency security.
Beware of potential cryptocurrency scams, such as:
Each crypto owner is usually given a private encryption key that they can use to access their cryptocurrency. Private keys are generated automatically, so there isn’t any action needed on the user end to create one. These keys create a secure way to verify and maintain ownership.
However, they are also the only way to do so. That means if someone loses their encryption key, they lose access to their cryptocurrency. Crypto owners can help protect their private keys by storing them in a digital wallet. Different wallets may have different key management methods — some, like PayPal, will manage the keys for the user, while other wallets may require the user to manage their keys.
Crypto transactions are typically final because transactions recorded on the blockchain can't be reversed. If someone accidentally makes a crypto transaction to a scammer or fraudulent business and sends it on the blockchain, it will likely be difficult to get that crypto back.
Cryptocurrency phishing can occur when hackers try to steal someone's private keys to access their crypto or if the hackers gain access to someone’s crypto wallet account. They usually do this by sending fraudulent emails with links to sites where people can enter their private information. For example, a hacker may send an email impersonating a reputable finance company imploring them to go to a form and fill in their private details. People can try to avoid phishing scams by not opening suspicious emails and texts and never clicking on questionable links.
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It's important to know how to potentially protect cryptocurrency and help store it securely. Digital currency owners may consider these tactics to help keep crypto safe:
Getting started with cryptocurrency may seem overwhelming. But people can consider some general guidelines to potentially decrease risk and buy cryptocurrency safely:
Learn about buying, selling, and holding cryptocurrency.
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