Bitcoin is everywhere on the news and the internet.
You may have heard stories from celebrities or your own friends about overnight success and downfalls.
One of the stories you’ve probably heard before is when Laszlo, back in 2010, bought two pizzas for 10,000 bitcoins. At that time, those pizzas were $40, but today, 10,000 bitcoin is now worth more than $380 million. Imagine the number of pizzas it could buy!
High returns in bitcoin have generated interest from new investors and old hedge fund managers. But is it safe to invest in cryptocurrencies like bitcoin?
In this article, we talk about the security of bitcoin technology and how to protect your holdings.
What is bitcoin?
Bitcoin is a digital currency (cryptocurrency) that is unregulated. Unlike traditional currencies like the US dollar, it is not backed by a government or monetary flows. Instead, it relies on peer-to-peer technology and cryptography known as the blockchain. All transactions are recorded in an accounting ledger to establish transparency and reliability. The leger is stored in multiple copies on a network of computers called “nodes.” These nodes verify that transactions are genuine before adding them to a chain of previously vetted transactions.
Is Bitcoin Secure?
The main concern for Bitcoin investors is the possibility of hacking and fraud. However, in theory, the blockchain is unhackable with the current computational capabilities of computers. That’s because of two reasons: the ever-expanding number of nodes and the algorithmic build of the blockchain.
The number of nodes increases every day, and blocks are added to the chain every 10 minutes. So, if you wish to hack the entire system, you’ll need impossibly high computing power to crack the key of at least 51 nodes and confirm a transaction in less than 10 minutes.
Can Quantum Computers Break The Blockchain?
Even with quantum computers that can execute and crack the password of every account in a snap of a finger, a quantum computer needs 1.9 billion qubits to hack the bitcoin blockchain within a 10-minute window. Compared to today’s most advanced computer, IBM’s superconducting quantum computer has only 127 qubits. So, it needs to be a million times larger for supercomputers to threaten cryptocurrency. Plus, we are optimistic that quantum computers can also be used to counter these attacks.
Are Bitcoin Exchanges Safe?
The biggest and first among these hacks happened on the Mt. Gox bitcoin exchange, where over 480 million dollars (close to 33 billion with bitcoin’s current value) was compromised. The breach resulted in multiple lawsuits and caused the exchange to declare bankruptcy. However, it’s important to note that the Mt. Gox case and other bitcoin hacks are breaches on the exchange and not the bitcoin network. The same goes for individual crypto wallets. That is why it’s essential to keep your crypto in a secure location and follow proper cybersecurity practices like hot wallets, cold storage, and two-factor verification.
How Do We Make It Safer?
If you plan on investing in bitcoin, be wary of the risks involved. First, the volatility of the market compared to traditional investment options is on a different level. Plus, the 24/7 operation of the crypto market can result in terrible trades due to long trading hours. However, there are ways you can mitigate these risks in investing, like doing your research, learning the different crypto market trends, and investing in coins-backed and vetted big crypto platforms such as Binance and Coinbase.
Binance and Coinbase offer hot wallets that store your funds for you. These platforms have a two-factor security key that authenticates logins and withdrawals from your account. In the event of theft or hacking because of the platforms’ mishaps, they are likely to offer compensation, just as Binance did back in 2019.
However, if you accidentally send coins to someone else, you’ll not be able to get them back. You might want to consider cold storage like a USB drive disconnected from the internet. However, even cold storage has risks, such as losing access to your investment if you lose your password. So, whichever you choose, be extra careful. Look out for scams, phishing practices, and research before investing your money.
What Are Other Types Of Scams To Look Out For?
An ICO (Initial Coin Offering) is when a cryptocurrency is offered to investors before being released to the public. However, new coin offers can occasionally be deceptive, leading investors to invest in a cryptocurrency that does not exist. If something appears too good to be true, it most likely is. Read the project’s white paper and investigate the founders. For beginners, it is best to stick to the top 10 cryptocurrencies listed on major crypto exchanges
Another thing to look out for is the classic pump and dump. A few investors may pour a large amount of money into a cryptocurrency, artificially raising the price while persuading private investors to join in. The initial investors then profitably sell their cryptocurrencies or shares before the price drops again and then leave inexperienced investors holding the bag. These traps usually use Illiquid cryptocurrencies, coins with very little activity. It is best not to invest in skyrocketing coins or wait for the dust to settle down before investing. This way, you’ll lower your exposure and risks.
Final Thoughts
Investing in gold, real estate, stock market, derivatives, or bitcoin all comes with risks. Mitigating and managing these risks is the name of the game. We recommend investing in top bitcoin platforms like Binance and Coinbase, creating a hot wallet, doing your research, and following best trading practices to keep your bitcoin holdings safe. And remember to only invest what you’re willing to lose.
On the other hand, if you’re not yet ready to invest in bitcoin, that’s okay. You might want to build your funds first and start an online business. For other business-related tips or ways to make money online, visit Internet Home Business.
