Cryptocurrency

Cryptocurrency

Does all of the hype surrounding cryptocurrency confuse you? If so, you are not alone. You may be wondering what exactly cryptocurrency is, why it is utilized and the potential security risks associated with conducting transactions via cryptocurrency.

To help orient you, let us look at the concept, types of cryptocurrency, usage and security risks and best practices associated with using this form of currency.

What is Cryptocurrency?

Cryptocurrency is a digital coinage, which utilizes encryption techniques to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. Simply put, cryptocurrency is unlike cash in that it is not physically accessible. Cryptocurrency holdings are electronic and do not have oversight by the government but rather through the shared community of internet users as a whole. Crypotocurrency transactions are recorded on a public ledger referred to as the Blockchain, a mechanism that validates and records cryptocurrency transactions.

The most popular type of cryptocurrency is Bitcoin, introduced in 2009. Other cryptocurrencies include Ethereum, Tether, Litecoin, Zcash, Ripple, Monero and other lesser-known brands.

Why Cryptocurrency instead of traditional currency?

There are various reasons why individuals are utilizing cryptocurrency, including:

• • Privacy associated with transactions (i.e. no name associated with credit card)
  • Low cost processing fees
  • Accepted globally, eliminating the need to exchange currency
  • Expedited process for investments

What are the security risks and concerns of using Cryptocurrency?

While cryptocurrency may be an appealing form of currency for some individuals, there are risks associated with transactions.

• • Vulnerabilities within cryptocurrency platforms can open the door for hacker exploitation and result in a cyber breach. If your "wallet" is exposed, the potential result is theft of your cryptocurrency account.
  • Cryptocurrency providers are becoming frequent targets of Distributed Denial of Service (DDoS) attacks, which means consumers of a cryptocurrency provider impacted by a DDoS attack may be unable to access their currency.
  • The anonymous nature of transactions opens the door for fraud. Cybercriminals find cryptocurrency an attractive method of laundering funds and committing fraud as they often work through the "dark web", the part of the World Wide Web that is only accessible by means of special software, allowing users and website operators to remain anonymous or untraceable. Cybercriminals are able to conduct nefarious activities through this black market exchange.

Best Practices for utilizing Cryptocurrency

So now that you know the security risks associated with cryptocurrency, what practices can be used to ensure you do not fall victim to theft or fraud?

• • When accessing your account with a cryptocurrency provider, ensure you have two methods to verify your identity. This will prevent theft of your currency in the event your password is stolen.
  • Do not share the private keys associated with your cryptocurrency with anyone. Follow the same protocol you utilize for protecting your passwords.
  • Do not store your private keys on an internet-connected device. This widens the opportunity for hackers to access your cryptocurrency wallet.
  • Regularly back-up your cryptocurrency wallet. Unlike credit or cash, a technical malfunction of your computer or hard-drive could result in loss of your currency if you do not have a backed-up copy.

With the explosion of technologies, applications and confidence in online transactions, we continue to see the emergence of alternative methods for communication and business transactions. We hope the information has been informative and will assist in your evaluation of cryptocurrency.