Digital currencies are arguably the most secure instrument capable of transferring value between unspecified parties. Yet, the process of trading and keeping crypto currencies can be quite risky. It does not face problems that plague paper currencies but this type of tender must cope with unique challenges in the financial technology industry.
Crypto Currency Wallets
The widely-accepted method of crypto coin storage is the digital wallet. It is user-friendly and practical. The concern is security. It is safe to use? In case the virtual currency is stored on a computer, your assets will only be as protected as the hardware is. This is similar to preserving sensitive information on a hard drive or USB.
No wonder, some users are fearful while browsing. You should not store passwords or codes in an unencrypted file on the computer where your wallet is. The best way is to remember the password or keep it offline. Install the digital wallet on a device that is not used for daily browsing. A Linux Operating System (OS) is said to be more virus and hacker-proof. Linux does not require installation as it can be booted from an USB stick.
Cold storage is another option. It means keeping coins in offline wallets and limiting possible unauthorized access. This wallet is created on a device (offline) which is not connected to the web. You can still install the wallet, produce keys and send coins. A hardware wallet is the safest and most convenient. This is a portable gadget (USB sick) with multiple levels of security protection as well as uncomplicated and secure software app that stores virtual currencies. A review to the Ledger Nano wallet can be found here.
Trade and Purchase
Crypto currency shopping requires users to look for the best way of maintaining assets online and accessible. A lot of users build so-called hot wallets for daily transactions and cold wallets to keep greater part of their assets that are not accessed frequently. This practice is used by numerous exchange websites. Even if you are not a regular crypto currency trader, it is necessary to exchange your coins occasionally. Dealing with exchanges cannot be avoided.
This was what the chief executive officer of Livecoin.net (Svetlana Geller) said to the topic: “With this kind of protection, your account can only be hacked if the person has complete access to your desktop, laptop or mobile phone. This is difficult enough for a cyber criminal. You can put 10 more protections on top of it but none will be nearly as effective.”
Exchange and Storage
Frequent exchange traders or those who merely keep some of their assets in said exchanges to branch out risks must opt for an exchange which is not just convenient but also dependable and protected. Exchanges are centralized facilities so the possibility of these being hacked is higher. In addition, there is the likelihood for them to disappear with assets of clients. There were many times digital exchanges evaporated or crumbled in just a matter of days.
Here are some examples: One is the unexpected resignation of William Dennis Atwood, one and only director of My Coin. This should have raised an alarm but instead, this went unnoticed by the virtual currency community. One month later, the infamous Hong Kong exchange went bankrupt leaving behind numerous users. The collapse of CRYPTSY was more expected. Said exchange went through plenty of technical problems and produced dubious administration policies. During the first few months of 2016, it declared insolvency due to the hacker attack that took $7.5 million from the exchange. However, legal investigations showed the owner probably directed the exchange’s funds to his personal accounts.
Signs to Watch Out for
What are the premonitions smart traders must watch out for? It seems that the crypto currency world is all about trust and integrity so industry personalities must not engage in activities that indicate negative or doubtful indications or signs. Recurring technical issues as well as suspicious policies are supposed to be ignored. The bottom line is you need to be vigilant enough since there are many unscrupulous personalities and groups out there.
Ms. Geller explained there are a lot of signs that exchanges are not to be trusted if these entities make use of crude schemes. For instance, the exchange crashes all of a sudden during severe fluctuations of BITCOIN prices or once back-up orders of customers are met inexplicably at a disadvantageous market price.
She also said BTC withdrawal problems become a big red flag. Alternative coins may get stuck for several months because of defective nodes because their mobility is in fact not a pertinent factor. However, the low mobility of the Bitcoin is clearly an ominous sign. Transparency cannot be a clear indication at all times. There are some transparent exchanges but later vanished with their clients’ hard-earned funds. On the contrary, many non-transparent exchanges are well-respected and trustworthy such as BTC-e.
The latter is a virtual currency trading platform and exchange established in July of 2011. As of February (2015), the exchange deals with roughly 2.5 percent of all BTC’s exchange volume. It facilitates trading between USD, Euro currency and Russian Rubble and all crypto currencies. These are BTC, LITECOIN, ETHEREUM, NAME COIN, DASH, and PEER COIN. BTC-e is a subsidiary of Coin Desk BTC Price Index which was launched in September of 2013.
Security is non-negotiable. It is supposed to be among the primary considerations of crypto currency users. However, things are not to be taken lightly. It is important to diversify because of hackers and the like. It is always better to be safe and secure than being sorry.