Since its inception in 2009, Bitcoin has been subject to many speculations. Aside from questioning its value and use cases, people are apprehensive about how safe it is to use bitcoin. Bitcoin itself is safe, the way of how we buy, use, and store it is where it becomes tricky.
Bitcoin creators have developed the coin as a store of value to allow secure and borderless peer-to-peer transactions. Free from the bounds of any centralized financial institutions, investing in Bitcoin opens better opportunities for secure profits. Despite an ideal ROI, volatility is a major concern.
The technology that brought Bitcoin into existence makes it a secure financial investment. But the price and value of Bitcoin remains subjective and highly influenced by users. Blockchain is an evolving field of technology that many economies are embracing around the world.
Is Bitcoin Safe?
Technically speaking, every unit of bitcoin is safe. Blockchain stores and secures it cryptographically. This blockchain is a type of a distributed ledger that keeps track of all created bitcoins through the process of mining and all transactions involving BTC.
Read Also: How Blockchain Technology Works
As all bitcoins are located in the blockchain, most of the bad news surrounding this cryptocurrency does not involve the actual asset itself. Rather, it affects third parties like crypto exchanges, price volatility, preferred storage, and cybersecurity threats.
We have previously mentioned the main attributes of bitcoin: decentralized, anonymous, and transparent. To elaborate further, these also what make bitcoin become safe at best.
Bitcoin is secure and encrypted.
The Bitcoin network is unlike the normal hard coding within typical IT systems. Blockchain’s distributed and stable system serves as its underlying technology. This system comprises of thousands of computers (nodes) globally.
These nodes or miners are the ones who responsibly maintain the network by confirming the transactions on a regular basis. Collectively, all information is kept hidden and trackable in the form of blocks. These blocks work alongside each other in forming a massive blockchain.
Bitcoin’s blockchain requires an enormous amount of computing power to be hacked and manipulated. Utilizing the Proof-of-Work (PoW) protocol, even if hackers do manage to get into the system, it will require too much effort to take something of value. Any malicious attempt will not go undetected by the community.
Bitcoin is public and transparent.
You might have hesitation if you can hear the word “public” especially when we are in the context of financial records. But being public means that all transactions can be checked transparently by any user even without exposing their personal identities.
Anyone can check a bitcoin transaction in real-time through a blockchain explorer. Here, you can search a TXID and see the block height, amount, and the time the transaction was recorded in the blockchain. No single entity can tamper these records in any way.
Once a transaction has been entered into the system, it is now irreversible. Miners successfully add transactions to the blockchain once confirmed. Moreover, they ensure that no bitcoins are spent twice or stolen.
Bitcoin is robust and decentralized.
There is no central Bitcoin server. Over 10,000 supernodes across the world are part of the Bitcoin blockchain servers. These nodes check the transactions and confirm each one of them in a span of a few minutes, roughly around 10.
No one can hack the entire system using a single server because of blockchain’s decentralized nature. In the same way that if one server malfunctions, the others can pick up the pace and carry on solving the mathematical puzzle to confirm blocks and receive block rewards.
The network can withstand any hacking threats as it is too difficult to hack into thousands of servers and actually gain control of 51% of the nodes. Nothing is impossible, yes, but it is highly unlikely to happen as the web of nodes cannot be rigged that easily without being stopped.
How is Bitcoin Safe?
Bitcoin transactions cannot be compromised as all blocks are interconnected. That is the beauty and essence of the blockchain. Through this public encryption method, transactions are kept safe and ensured to be unique with its own hashes and generated public addresses.
It is not possible to just copy and paste bitcoins to multiply and distribute. This is not how Satoshi created it to be. Else, the value of bitcoins will deteriorate as many fake bitcoins can be made. Instead, every BTC that exists is unique and a part of a greater ledger.
Someone can acquire a bitcoin either by trading or mining, and the Bitcoin blockchain will have a record of this. You cannot simply hack a single block and expect a bitcoin to be transferred to your account. Each transaction makes up a block that connects to another block.
Once a transaction has joined a block, it becomes impossible to change or modify it. Any breach attempt will fail as the bitcoin network is susceptible enough against hacks. While the blockchain itself might be secure, the user will be responsible for keeping their own BTC safe.
How to Keep Bitcoins Secure
Despite the numerous incidents of crypto hacks, scams, and arrests within the blockchain and crypto industry, experts anticipate more users will buy cryptocurrency in the coming years. This is mainly because users and merchants have been recognizing various crypto use cases.
Generally, it is safe to use bitcoin, especially if you know how to protect your assets within your pockets. We have here the simplest ways on how to keep your bitcoins secure whether on your wallets, in exchanges, or anywhere online as well as offline.
When choosing a bitcoin wallet to store your bitcoins, you have to follow the best Bitcoin security practices like backing up and protecting your wallet’s private keys and having separate crypto wallets for daily trading and long-term storage.
Treat your private key as the key for your money vault. This is the access point for your bitcoins. If your private key falls in the wrong hands, you should be ready for the possible consequences. Keep your private key secure at all times to keep your Bitcoins safe and sound.
Some wallets may provide a backup feature or mnemonic phrase that protects your private key. Protect your wallet against account hacking or unnecessary withdrawals with this feature. Do not leave your crypto wallets unattended to avoid risks.
Exchanging and spending BTC
When you want to do any transactions with your BTC or altcoins, make sure to choose the most reliable and trustworthy third-party services. Alarmingly, since 2011, cryptocurrency hacking incidents cost more than 11 billion USD.
The cryptocurrency market is thriving which makes it one of the most notorious industries for breaches. The Wall Street Journal stated that over the years, crypto exchanges lost more than 1.7 billion USD in hacking incidents. This clearly indicates that the risk of crypto exchange hacks is always there.
When spending or exchanging Bitcoins, users must be very careful. If you become a victim of any casualties, you do not have any certainty that you can fully recover any of your assets. Once sent, you cannot take back a bitcoin payment.
Crypto exchanges lack asset protection for Bitcoin and other cryptocurrencies, unlike traditional bank accounts. Though some exchanges have the policy to cover any asset loss, there are still huge risks.
The best way to protect your confidential data like account details, IP addresses, and passwords is by using a virtual private network (VPN). Attackers cannot target a device connected to a reliable and secure VPN.
To avoid experiencing any cyber-attacks, make sure to use a VPN for cryptocurrency transactions to ensure that your connection is protected. Do not use any shared or public connection outside that can expose your crypto wallet and mobile-specific activities.
Staying away from scams
Many people in the cryptocurrency community aim to take coins or tokens from their fellow users. You may have been securing your wallet very well, but exposing yourself to social media or other platforms may cause your assets to harm too.
Aside from being vigilant to ICOs, the team behind it and the purpose of the crypto project, you have to also be cautious on the social web and community platforms for any suspicious offerings like airdrops, Ponzi schemes, and pump and dump online groups.
Here are some of the most common and dangerous cryptocurrency scams you must stay away from:
- Phishing scams pertain to those fake emails or comments with an attached link. These links can lead you to expose your wallet details or lose your assets altogether. Do not click on any suspicious links and do not disclose your private keys to anyone.
- Spoofing is when people or businesses pretend to sell something, take your payment, and then fail to deliver what you paid for. Check the website URL or credential of the seller before proceeding to checkout. Do not proceed to payment carelessly.
- Fake bitcoin wallets or malicious malware can harm your cryptos. Avoid accessing any sketchy websites or clicking unverified links that can cause nasty bugs to get into your system. Hackers can take your data and assets within seconds, beware!
- Giveaway scams are also evident online. Use your common sense when reading these offers. If it is too good to be true, the higher the probability that it is fake. Do not fall for any huge amount that will be given away by random users or unofficial pages.
Read Also: How to Buy, Sell, and Store Bitcoin?
Are Bitcoins Legal?
Bitcoin exists in an unregulated marketplace as cryptocurrencies do not have a centralized issuing authority. In its early years, the dark web’s illegal activities are typically facilitated through Bitcoin and cryptocurrencies. Outlaws use them for drugs, armories, and other conspiracies.
Drug traffickers, pundits, and highly-classified business deals operate using cryptocurrencies. They need to conduct transactions privately and anonymously. One known example of a dark web market is the digital Silk Road, which the FBI shut down in 2013.
Approximately one-quarter of bitcoin users were involved in illegal activities. Indeed, around $76 billion of illegal activity per year involve bitcoin — staggeringly 46% of bitcoin transactions. This is close to the scale of the U.S. and European markets for illegal drugs.
The illegal share of bitcoin activity is decreasing as bitcoin becomes legal in the U.S., Japan, the U.K., Canada, and other developed countries. Discussions for country-specific regulations are ongoing as the interest in bitcoin and the emergence of more altcoins become prevalent.
No country has proclaimed BTC as their national currency but more and more states are becoming open for BTC as means of payment. Cryptocurrency laws and regulations are yet to be finalized. Until today, taxation and consideration as legal tenders for these assets are still unclear.