The Security Risks of Cryptocurrency
Did you know that ten percent of people have invested in cryptocurrency? What is causing the rise of investments with cryptocurrencies such as Bitcoin?
Many people report digital currency investing as an easy way to trade and a higher potential for short-term growth. The market for cryptocurrency provides a level of excitement due to its volatility and rapid-fire growth or downfall.
It also presents unique security risks. To learn more about cryptocurrency security, then keep reading on.
What Is Bitcoin?
When most people think of cryptocurrency, they think of Bitcoin. Arguably, it has become the staple of this industry and the topic of much debate.
What is Bitcoin? To better understand security risks, it is important to know what exactly it is. As the name suggests - Bitcoin is a form of currency.
It is a digital form of currency, meaning that you can trade it directly. Since there are no physical forms of Bitcoin, it is kept open in the public domain for people to see current balances.
Unlike other forms of money, Bitcoin only has a set amount of units that are available. For example, there are 21 million Bitcoins available.
When someone trades Bitcoin, it gets verified through a complex computing system called mining. Bitcoin, and other notable digital currencies since then, are not protected by banks or the government. This is the reason why some people question is Bitcoin safe.
How Is It Protected?
Bitcoin transactions operate with blockchains. Essentially, these blockchains regulate the trading of Bitcoin. Each blockchain has its own transactional data that is available in real-time.
The 14,000 blockchains act as a deterrent for hackers. Developers can split off another blockchain if they note suspicious activity. Each blockchain provides unique transcripts of numbers and encryption for additional safety.
However, these blockchains present a variety of Bitcoin security problems. For one, blockchains don't offer complete protection for cryptocurrencies.
If something does go awry within the blockchain, there isn't a definitive way to stop it. In a credit card or bank transaction, once a fraudulent charge is suspected, it is immediately cut off.
During a transaction through blockchains, there is nothing to override fraudulent transactions of Bitcoin. If someone is not diligently monitoring the blockchains, then fraud isn't detected. Sometimes, people detect fraud down the road such as one to two days later.
The transactions that occur within the blockchains are also completely anonymous. While anonymity has its benefits - it is also difficult to determine within the chain who has committed a fraud.
What is Monero? This cryptocurrency also functions with blockchains. It was created almost eight years ago with the goal to provide more anonymity and protection for people trading digital currency.
It is a type of blockchain that blocks the sender and recipient details. It also masks how much is traded. It gives users the chance to operate the transactions of their cryptocurrency under their own CPU.
How is Monero different from Bitcoin?
Bitcoin operates fully in the public domain, giving participates pseudo names. While this curbs some of the risks for privacy, it still poses risks. Monero's cryptocurrencies also provide less distinguishable differences.
Bitcoins have their own individual transactional data associated with each coin. On the flip side, you wouldn't be able to tell the difference between one Monero digital currency versus another.
This provides pros and cons. It makes Bitcoins more easily traced. However, if someone purchases a Bitcoin that was previously used for fraudulent uses, then it runs the risk for future banning.
Monero does not operate under the same strict tracking, instead, it provides anonymous transactional deeds that can't be traced to prior uses.
Ring Signatures and Other Security Measures
Monero uses what is known as ring signatures to provide users with added cryptocurrency security. Ring signatures are someone's signature for a transaction.
These ring signatures are set up to protect the user's identity. It has a complex set-up of identification numbers that make it difficult, if not impossible, to trace to a certain person.
Monero most recently implemented what is known as RingCT. This protects each transaction by not disclosing the amount that was traded. Like ring signatures, it also protects the recipient and sender's identity.
While this high level of security is optimal for users wanting to protect their identity and assets, it makes it a popular use for illegal acts. The high level of security for maintaining anonymity is used for both legal and illegal transactions.
However, Bitcoin security features run the risk of future bans and traceable transactions. If you want your digital currencies protected, Monero is a better option to go with.
PirateChain is a more recent private cryptocurrency that hit the market just a few years ago. PirateChain uses a few different methods to ensure protection over their cryptocurrencies.
The developers of this cryptocurrency use delayed Proof of Work (dPoW), zero-knowledge proof (zk-SNARKs), and similar blockchains that Monero uses. This results in greater privacy with digital currency transactions.
The zk-SNARKs model makes transactions private. The public does not have access to the names of traders. It boasts complete anonymity. Like other cryptocurrencies, it operates on a decentralized basis.
This means that the currencies are not traced by banks or governments. Instead, the currency is traded directly from one person to another. PirateChain is a branch from the Komodo blockchain which is also a branch from the Bitcoin blockchain.
If a hack were to happen, it would affect PirateChain, Komodo, and Bitcoin. By having more databases involved, this technology essentially helps detect any suspicious activity.
PirateChain claims to block up to 51% of fraudulent charges or cyber-attacks. Attacks generally happen when people control over 50% of a blockchain. the added proof of security deters hackers from spending excess time and money to try and overcome the extensive security features of PirateChain.
Are there any security risks of PirateChain? It is extremely difficult, but not impossible, to hack PirateChain.
Yet, users can rest easy knowing that most recently PirateChain joined Bitcoin.com Exchange and the Blockchain Privacy, Security & Adoption Alliance (BPSAA). What does all of this mean?
The exchange platform has heightened security measures such as two-factor authentication and IP whitelisting. Make sure that you implement further safety and security measures by incorporating advanced cyber security software. This also helps protect your identity and assets.
There are a variety of security risks with cryptocurrency. PirateChain and Monero both offer higher safety measures and anonymity with digital currency transactions.
If you want further safety measures to protect against data breaches and identity theft, then contact us today. Let us help you protect all of your computer's information and data from hackers.