What additional protection can be implemented with cryptocurrencies? Are they really as safe as they are repeatedly claimed?
Decentralization, traceability through the blockchain, anonymous transactions – all these terms are heard again and again in connection with cryptocurrencies. They are the key reason why digital currencies are considered completely safe. But is that really the case?
Are there no weaknesses when trading Bitcoin, Ethereum and Co.? And if so, what steps can each individual take to implement additional protection?
Cryptocurrency fraud and theft
An independent cryptocurrency that Neither financial institutions nor states can regulate is attractive to many. And unfortunately not only for those who are up to no evil. The lack of regulation has drawn the attention of scammers who have devised cunning schemes to gain an advantage from the very beginning. Especially at the beginning of crypto trading, there were often headlines about crypto thefts and crypto exchanges that were razed to the ground in a cloak-and-dagger operation.
To date, however, a lot has happened in this context. Investigators have exposed scammers. Crypto exchanges are subject to stricter regulation. Right here is a point where investors can do something themselves to get good protection: Choosing the trading venue.
The best crypto exchanges are licensed and strictly monitored so that users can be sure can be guaranteed that these are not fraudulent companies. These reputable platforms ask users to verify their identity according to Know Your Customer policies. This has nothing to do with anonymity. However, it has the clear advantage that you can prevent fraud and money laundering.
Decreasing anonymity for more security
Yes, cryptocurrency trading based on the blockchain is still largely anonymous. But certainly not as it once was. Especially with the large networks, fraud is no longer so easy these days. Illegally stolen tokens can be traced and paralyzed.
A little more regulation and a little less anonymity are aspects that many users are happy to accept in favor of security.
Secure storage of cryptocurrencies
One risk that cryptocurrencies may still pose today is that they could be stolen. Especially when there are large sums in a wallet, this is an attractive target for hackers. However, if the cryptos are stored in a cold wallet, i.e. an external storage medium, unauthorized persons cannot access them via an Internet connection. In any case, it is advisable to get a cold wallet. You should transfer your own cryptos there when a certain sum has been reached.
The so-called hot wallets, which are available online, are also equipped with some security precautions. Nevertheless, the possibility that hackers could gain access is not completely excluded.