Crypto Assets And Its Safety

The crypto revolution is over 15 years old and growing. Few could have imagined a world of digital money facilitated by globally connected computers.

Despite the wonders of blockchain technology, many safety issues should be considered when transacting with crypto.Despite the wonders of blockchain technology, many safety issues should be considered when transacting with crypto.

How Secure Are Crypto Assets?

At their core, digital currencies rely on cryptography. This makes it almost impossible to counterfeit or double-spend them. In the worst-case scenario, such forgery would require enormous resources from the bad actor, which may be less than the reward.

These digital assets rely on a decentralized or distributed network of computers connected to a blockchain. Every transaction has to be verified by each computer or validator based on set rules and becomes irreversible once approved.

A network becomes non-decentralized when an entity controls over half of the computational power, where it can alter the code. This is known as a 51% attack, a rare event, particularly with well-established and large blockchains.

These are the technical security benefits of crypto. Others have pointed to the absence of a central bank or government as another advantage. No central authority can interfere with or manipulate a cryptocurrency’s creation, unlike regular or fiat money.

However, many blockchain networks have become centralized over the years, where a few individuals own most of the coins. These are usually a handful of wealthy investors, venture capitalists, or foundations behind a certain blockchain. While they don’t alter the technical specs, these entities can contribute to the volatility of digital currencies.

All in all, crypto is relatively secure from a design standpoint. Of course, this design also makes it vulnerable to several downsides.

The Main Risks of Cryptocurrencies

Let’s look at the primary risks of using cryptocurrencies.

Fraud risks

One downside of decentralization is that the crypto environment easily becomes a free-for-all. The barrier to entry in creating legitimate-looking digital currencies is lower than ever before. Hence, scam projects are rampant.

It’s common for so-called developers to create a coin sold during a multi-million-dollar presale only to run away with the funds without launching it. Or if they do, they may ‘pump and dump’ the coin, artificially inflating its value to sell at a much higher price. This equals significant profits for the criminals at this point; however, the token becomes worthless once the value crashes.

Cybersecurity risks

While hacking a blockchain is much more resource-intensive, it’s easier through a person’s crypto wallet. Crooks use several clever techniques, such as phishing, SMS verification, and malware, to deceptively access someone’s credentials. They can then transfer all the digital currencies within the wallet to their own without accountability.

Regulatory risks

Despite existing for a quarter of a decade, the crypto market is largely unregulated in most countries worldwide. It’s for this reason that scams and fraud remain quite common. Investigators have a near-impossible task of linking real identities in crypto transactions, a stark contrast to traditional money.

Volatility risks

The rate of price changes in digital currencies is quite astounding compared to traditional currencies. For context, Bitcoin has witnessed eight 50% corrections since going live. As a relatively new asset, the crypto market is speculative, often driven by hype and short-term sentiment instead of intrinsic value.

Tips On Staying Safe

Investors or traders must be thoroughly informed about safeguarding their crypto assets to navigate all the risks mentioned here. Here are quick-fire tips.

• Trade or invest in well-established crypto projects instead of newly launched ones. Also, consider the least volatile projects.
• Always do your own research.
• Be wary of all the common phishing and other tricks to access your crypto wallet.
• Utilise strong, unique passwords for your wallets with two-factor authentication
• Consider a ‘cold wallet’ to store your crypto (in addition to your exchange wallet)
• Practise safe online behaviour.
• Check your crypto accounts often.
• Use regulated exchanges like DoshFX.

Summary

We can liken crypto to an ultra-modern car. While this vehicle may boast state-of-the-art safety features, parking it outside in an unfavourable neighbourhood with an unclosed door reduces the security’s effectiveness.

Fortunately, it doesn’t require one to be a computer whiz to transact and invest or trade with crypto safely. All that’s necessary is time to learn everything there is to know before participating in this market.

Exchanges form a large part of the experience. DoshFX is a considerable name in this regard. It is a secure, regulated, centralized crypto exchange primarily focused on the South African market but also friendly to users worldwide.