Bitcoin safety: what are the risks of Bitcoin?
Bitcoin safety and the risks associated with the cryptocurrency is a cause of concern for many investors and others looking to enter the industry. So, we start from the top in this article.
How safe is Bitcoin?
Operating on the blockchain – the most secure network globally – Bitcoin is one of the safest ways to keep your wealth. In fact, it was created to ensure safety and privacy, something lacking in traditional financial systems. Here are some of the factors keeping it safe:
- Cryptography: Cryptography is a means of encrypting data using a secret key. This key is usually an encoded message that is transferred between the two parties in a transaction – making it unlikely for people without authorization to decrypt the codes. Also, there is the fact that thousands of miners are working to ensure that these transactions are validated.
- Public: Bitcoin ledger transparency makes it difficult for hackers to break into it. The details are publicly available while keeping the personal information of the participant’s secret. All that is there to see is the transaction details.
- Decentralized: As already mentioned, the work of validating transactions falls to not just a few but several thousands of miners. This factor safeguards Bitcoin by ensuring that when one or a few nodes are hacked, the others can easily cover for it and keep the blockchain going.
- Permissionless: No single authority is responsible for granting ‘accesses’ to Bitcoin. Thus, there is no point in trying to compromise the security of one miner because they don’t own the key.
Several software providers and trading platforms, like Profit Edge, are also working day in and day out to keep your investments safe. Yet, there are risks you should be aware of regarding Bitcoin safety.
Related article: Why is Bitcoin mining banned in China?
What are the risks to Bitcoin safety?
Experts worldwide agree that the blockchain is very safe, but this does not make Bitcoin 100% impervious to risk. See some of them that you should know of:
- Fraud: Not traditional to Bitcoin, fraud is as old as time. Most times, it is not even the financial system’s fault but the individual’s. Anyone can fall for scams while carrying out Bitcoin transactions if they are not careful. There is no limit to the length that bad actors are ready to go, from fake verification codes to outright impersonation and even elaborate fake exchange platforms. Always be vigilant!
- Theft: One of the advantages of Bitcoin is the use of a security key to lock wallets, and this is also a significant disadvantage. Comparing this situation to a traditional safe or even physical wallet, criminals can find ways to compromise their security. They may steal the security key if you have written it down or stored it on your device. Do not rule out the fact that they can obtain it through force or coercion.
- Technology: Again, this is another advantage that could turn into a disadvantage. The blockchain is entirely reliant on technology to work. While at this time, it seems pretty safe, you should always keep in mind that time tests all things. Several hackers have made it their life-long aim to find a way to break into the blockchain, and the human mind respects no limits. So, it will be unwise to move all of your wealth into one place; it is like placing all your eggs in one basket.
- Human error: While we touched on human error already, it is important to rehash that point. Many things may go wrong with your Bitcoin safety that has to do with you. For one, you could trust the wrong person with some personal details, and it helps them gain access to your digital wealth. There is also the problem of forgetting your secret key and being unable to open your wallet forever. This usually happens when you try to be too careful and not have the secret key anywhere else but in your brain. As we all know, we can be forgetful, and many wallets do not have the option of recovering lost secret keys through other modes of verification.
- Policy changes: This is one risk that is beyond many of us. A government policy change may put your cryptocurrency at risk within the twinkle of an eye. It is helpful to always stay on top of news relation to cryptos to know when it is time to access another option before a ban makes it impossible to conduct transactions.
Expectedly, there are no absolutes in life and Bitcoin will not change that. The risks highlighted above have only to do with safety and not with investment as a whole. So, you should also take to heart price volatility and limited use when considering the broader scope of limitations to cryptocurrency.
Bitcoin is still a better bet for you as far as safety goes. However, you should always take risks to the heart and be on guard since most of the dangers have to do with you rather than the system itself. You may also like to read our latest article, What caused Bitcoin price crash after the 2021 boom?