The Distributed Ledger Technology (DLT) has brought a very complicated idea for those who didn’t attend a computer science class. Having records stored without a central reference point makes the whole idea of blockchain complicated. DLT has given birth to digital currencies like bitcoin. Although a considerable number of people have come across digital currencies , at a point, cryptocurrency security is always defined by three things. Some of which are out of control of cryptocurrency investors.
The three things that determine cryptocurrency security are,
The virtual currencies by themselves.
This is the most crucial step in maintaining the security of digital currencies. According to Forbes,
“When you are choosing a cryptocurrency, you are taking on all the risks related to the protocol. If somebody can identify and exploit protocol flaws, they will compromise the entire network, including you, and it will not matter which exchange or wallet you are using.”
As some coins are copies of others, forks, their individual security will be influenced by the security of their parent.
Apart from the security of individual digital currencies, where you trade them plays a major role in whether hackers can access your coins. Crypto exchanges implement their own protocols which are not entirely on the blockchain but on data centers or in the cloud. With exchanges getting into the crypto space without seriously considering the security aspect has led to investors losing their coins to hackers. A perfect example is the Coincheck hack which saw over $530 million in crypto land into the hands of hackers.
Virtual currency wallets.
Whether you prefer cold (hardware based) or hot wallets (online), their security level will largely depend on the security of what’s stored inside.
In the case that you like your wallets hot, your provider will have a higher control of your wallet than you. You only access the wallet using protocols which can be comprised and your coins siphoned. They exist off the blockchain
Although the security of the platform that any digital coin sits on is the first thing to consider, exchanges and wallets are equally important if you want to guarantee cryptocurrency security. A fault in any one of them will have far-reaching consequences. Before investing in any coin, choosing an exchange, and storing your virtual currency, put security first.
What extra measures do you think cryptocurrency developers, exchanges, and wallet providers are taking to ensure cryptocurrency security?
Leave a comment below and join the conversation.