Safety of cryptocurrencies

So far, no one has been able to demonstrate security flaws in cryptocurrencies like Bitcoin. However, there are two safety concerns associated with cryptocurrencies that people should be aware of. 

  • First point is on general security of web pages on the internet. Hackers are likely to try to break into corporate websites that handle finances and try to access either credit card information or private keys for cryptocurrencies. Credit card companies often protect their users from such security incidents, but not always. Merchants handling cryptocurrencies can’t store any information from their customers that later can be used to withdraw funds from their accounts, therefore the customers coins cannot be stolen. The exception are company such as exchanges, cryptocurrency banks, or a company that manages cryptocurrencies for customers online. However, such companies usually have a security measure in place for such hacking, for example by storing only 1-5% of their wallet balance on their servers. The other 95-99% of the funds are stored in so-called cold wallets, i.e. wallets that are not online or part of the same service as their website.
  • The second security issue is related to the personal use of passwords on computers or smartphones containing an cryptocurrency wallet. Hackers can get access to individual wallets stored on unprotected computers or smartphones. Therefore all cryptocurrency users are encouraged to encrypt their wallets and back them up in case of their devices failing or being hacked.

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