It seems as if you can’t open up a news site without seeing something about Bitcoin. Cryptocurrency has taken the past year by storm.
Imagine having purchased even just one bitcoin a few years ago. In 2009, a man invested $27 for 5,000 of the coins while writing a thesis on the encryption process. Now imagine selling it at the current price that’s inching closer to $18,000 per bitcoin.
That’s a pretty good investment!
But of course, with reward comes risk. Hackers recently stole $64 million from cryptocurrency firm NiceHash, a company that matches people looking to sell processing time on computers in exchange for bitcoin. And while NiceHash agreed to cover the losses, not all investors are as lucky. More than 980,000 bitcoins have been stolen from exchanges, with few of them being recovered.
So the question is: Is bitcoin safe?
It’s important to remember that it isn’t bitcoin that’s the problem Bitcoin didn’t get hacked. Instead, it’s the exchanges or marketplaces that are the weak point; these are what hackers go after.
Cryptocurrency is still very “Wild West.” Because so many people are jumping on the bandwagon and offering services for this new technology, many are doing so without thinking twice about security.
Still a little unsure about what makes bitcoin so popular?
Bitcoins don’t move around. They stay fixed to a public ledger, called blockchain. Anyone can check ownership by checking this ledger.
That makes it difficult to commit fraud. Because you can’t spend someone else’s bitcoins; it’s all a part of the ledger. You can’t spend the same bitcoin twice; the ledger is always up to date, and there’s only one ledger. You can’t fake the currency; it has protection in place.
But you do have to have a way to store it, to spend it. And like every other form of technology, that’s where potential hackers strike.
Bitcoin is stored with a public key/private key system. The public key system is available to anyone who trades cryptocurrency with you. Your private key is yours and yours alone. If you lose your private key, your bitcoin is gone forever.
When you store your cryptocurrency with an exchange or a web wallet, it means you release your private key to them. If they get hacked, you lose everything. If they go rogue, you lose everything.
Of course, you can handle all of this yourself. One safe option is using a site like bitaddress.org, which is a client-side application to create a public/private key pair. You take control of creating the key. You control how the key is stored.
Technology is always changing. And every step of the way, someone will be there, watching, waiting to see how they can gain. Your job isn’t just to learn about new technology. It’s also to become smart in using it in the safest way possible.
And when you have questions, we’ll be here.
For IT Strategy, Cloud Conversion, or Help Desk Services reach out to us at Silver Linings Technology 360-450-4759.