Many investors and cryptocurrency users consider Bitcoin, and other digital assets, the future of finance. But as they become increasingly popular, they are more likely to be targeted by cyber-criminals.
There are many reasons why these virtual currencies have gained acceptance in the trading and financial industries. Most importantly, there is no need for third-party intermediaries. Blockchain, the technology underpinning the system, enables users to send and receive funds instantly without the intervention of a middleman.
No government or central bank controls cryptocurrencies, as they are totally decentralized. Despite this, several governments around the world, most notably Japan, have recognized Bitcoin as a legal method of payment. Russia banned Bitcoin in 2014, but the country now seems to be reconsidering its position, according to Alexey Moiseev, the Deputy Finance Minister of the Russian Federation.
Haim Toledano, a specialist on the capital market and decentralization technologies, explains that the lack of regulation and the current uncertain legal status of cryptocurrencies “presents a golden opportunity for cybercriminals”. Numerous authorities are aiming to regulate the use of Bitcoin, Ethereum and other digital currencies and develop legal frameworks to protect users. In the meantime, however, cybercriminals continue to exploit the unwary.
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According to Tyler Moore, Assistant Professor of Cyber Security at the University of Tulsa’s Tandy School of Computer Science, it is difficult to protect Bitcoin owners from hackers: “I am sceptical there’s going to be any technological silver bullet that’s going to solve security breach problems. No technology, cryptocurrency, or financial mechanism can be made safe from hacks”.
The U.S. Department of Homeland Security funded a study conducted by Moore, showing that between 2009 and March 2015, 33% of operational Bitcoin exchanges were hacked. There are several ways to protect your cryptocurrency accounts from cyber-criminals. Haim Toledano recommends the best steps to take…
- Understand that it takes time, skill and personal responsibility to protect and secure your virtual currency holdings.
- Take the time to analyse the cryptocurrency platforms you use and the security measures they take.
- Keep backups and use cold storage to keep your cryptocurrency accounts offline, such as a USB or external hard drive. Do not carry this storage device with you at all times, and keep a duplicate in a safety deposit box at your bank.
- Use wallet encryption as much as you can, especially if you’re considering cloud backup – and make sure you can manage your own encryption keys. Always use a very strong and unusual password.
- Use different types of wallets depending on your needs. Mobile wallets are fine if you want to carry cryptocurrencies for extra disposable cash, but they shouldn’t be used as your primary storage if you have a large amount.
- Do not trust free anti-virus programs. Spend money on reputable, powerful software that is proven to prevent users from cyberattacks.
- Using two-factor authentication is recommended. This will add extra security when accessing your wallet. Many websites already offer this feature, but you might also need to enable it through your privacy settings.
Taking these steps will protect you from cyber-attacks to a certain extent, but serious cryptocurrency traders should stay up to date with emerging threats by regularly visiting specialist online forums.
It’s impossible to guarantee total protection of your digital assets, but this shouldn’t deter you from entering the exciting world of cryptocurrency trading. Just make sure to take the necessary precautions to safeguard your portfolio.