How Safe are Cryptocurrencies in 2021?
If you are conversant with happenings in the cryptocurrency market, then you already know all about the fluctuations in digital currency. There have been swings in the value of Ripple, Bitcoin, and others over the years. While many things have happened, the crashes and big jumps have made it to the headlines more.
There have also been a lot of security breaches. For instance, some users who buy litecoin have reportedly lost their money, amongst other losses. With all of these happenings, many have been asking, “how safe are cryptocurrencies in 2021?” They also want to know the most secure cryptocurrency available. Read on to find the answers to these pressing questions. But first, let’s discuss the problems.
Hacks are becoming more common
The digital currency market has witnessed more hacks in recent times. Examples of such include the DAO hack, Bitfinex hack, and the Mt. Gox hack. Also, earlier this year, Coincheck, a Japan-based cryptocurrency company, claimed cybercriminals hacked their system, ripping them off 500 million worth of NEM (that’s about $400 million).
With the cryptocurrency market getting more saturated every day, the hacking rate may also increase, thus bringing many to ask, “Should I buy cryptocurrency?”
There are two main parts to the question. The first refers to cryptocurrencies. It raises questions such as “are these coins safe in themselves?” “Do they have a system that prevents hacks?” The second part is the exchange. Unfortunately, most of these hacks happen at the exchange stage. So, the question then is
Is the exchange the problem?
According to reports by Robert Schwentker, a cryptocurrency expert and the president and co-founder of Blockchain University, he says that “the hack of Bitfinex exchange in Hong Kong, which resulted in approximately 120 000 bitcoins being stolen—was not a hack of Bitcoin protocol itself”. The same is true for the Mt. Goax hack.
From all indications, something must have gone wrong during the exchange process. Either certain security protocols were neglected or exchange procedures were not followed, leading to loss of users’ money. Given this, another question comes to mind:
Are regulatory measures required?
With the number of hacks being witnessed, it’s become important that certain regulatory oversight be put in place to see to cryptocurrency exchanges such as Kraken, Bitcoin, Coinbase, Coinmama, etc. Although these measures are not in place currently, only time will tell if they eventually will be.
What other threats does blockchain technology face?
While hacks may be one of the main and most common threats to cryptocurrencies, it isn’t the only one. There are other threats blockchain technology faces. For instance, some scams deceive users into buying fake cryptocurrencies, only to part with their money and leave them with nothing.
Also, something as simple as a hard drive crash can cause a user’s bitcoin to be lost or stolen. This is because cryptocurrency is stored in wallets, only this time it’s digital wallets, and like real wallets, they can get lost or stolen. While you may think it’s impossible seeing as these wallets are stored in the cloud, Cybercriminals can gain access to the wallets stored in these mediums.
Besides, even if you decide to store your digital money on your hard drive, it’s not a guarantee of its safety. Why? Well, because if the hard drive crashes (which may happen due to several reasons), your wallet is likely to crash with it.
All of these still leads us to ask:
Are cryptocurrencies safe?
Bitcoins and other types of cryptocurrencies have a system to place to ensure their safety. First, there’s a process in place that makes transactions irreversible. Also, all transactions are public, which means all transactions can be seen, making it difficult to cheat or hack the system.
Besides, cryptocurrencies are decentralized. With this, if something goes wrong in one server, there are several other servers available to pick it up immediately; hence, hacking by cybercriminals is a waste of time.
Despite all these measures, there’s no guarantee you won’t get hacked. But with bitcoin and other cryptocurrencies, users are more likely to suffer losses accrued from bad investments or scams that involve giving up their coins rather than hacks.
Final thought: Store cryptocurrencies with caution
Seeing as these digital coins are subject to hacks, scams, and crashes, cryptocurrency owners are now engaging in the services of exchanges to keep their money safe. But as we have highlighted earlier, these exchanges aren’t immune to hacks and other activities.
Overall, cryptocurrency, just like physical cash, can get stolen or lost. Therefore, before you invest in cryptocurrency, ensure you consider all the options available to keep your money safe.