Theft has been a problem in all of history, but the digital age brings new challenges. While digital currency has several advantages over cash, it comes with some unique risks, like hacking and online fraud. Cryptocurrencies such as Bitcoin solve some of these issues, but you should still take care.
The fact of the matter is no form of money is ever 100% safe without proper protection. Just because Bitcoin is more secure doesn’t mean you shouldn’t be careful with it. Like with any other kind of currency, you must take steps to keep it safe.
Safety Advantages of Bitcoin
Bitcoin already boasts several security benefits over traditional currency. When you buy something with a credit card, a third party pulls the funds from your account (known as a pull transaction). Bitcoin, on the other hand, uses push transactions, where you hand the payment over yourself.
With pull transactions, hackers can pretend to be you and get your bank or credit card company to move money for them. With a push transaction, though, they need access to the money itself, not just your personal information. That’s not where Bitcoin’s safety features end, either.
Bitcoin leverages the blockchain, so it’s decentralized and immutable. Some scholars suggest using Bitcoin to prevent identity theft because the system is so secure. There are still some precautions you should take, though.
Recent Bitcoin Fraud Cases
It may be more challenging to commit fraud with Bitcoin, but it’s not impossible. If a criminal steals your identity, they may be able to access your Bitcoin wallet. Since there are 15 million cases of identity theft each year, it’s no small risk.
In 2018, a fraudster stole $5 million worth of cryptocurrency through a scheme called SIM swapping. This process involves tricking phone companies into transferring numbers to a SIM card that you control. By stealing phone numbers, you can access a wealth of accounts, sometimes including Bitcoin wallets.
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With Bitcoin, your transactions are secure, but your wallet may still be vulnerable. To get the most out of Bitcoin’s security advantages, you need to make sure your wallet’s safe.
Guarding Private Security Keys
The easiest way into your wallet is with your private security keys. If you want to keep your Bitcoin secure, you’ll have to adopt safe security key management. The first step is to keep offline backups of all your keys.
You should take steps to make sure these offline backups are safe, too. The most straightforward way to do this is to store them off your computer, like on a flash drive or physical document. Be careful to protect these storage solutions, too, not letting them slip into the wrong hands.
You can also turn to security software to keep hackers from accessing your backups. If you choose to go this route, make sure you update your software and operating system frequently.
Crypto Account Management
If you use a service to store or protect your Bitcoin, you’ll have to secure that account. If a fraudster can convince the service that they’re you, they can gain access to your cryptocurrency. Since email compromise is the leading type of online fraud, you can start by securing your email.
Use two-factor authentication for all of your email addresses. You may consider using email security software as a second layer of defense as well. While you’re at it, it’s a good idea to set up two-factor authentication on any service you can.
Make sure you never use the same password for more than one account. If you have trouble creating or remembering strong passwords, you can use a password manager.
Other Standard Security Practices
As with traditional currency, be careful where you send your Bitcoins. While hackers may not be able to access your wallet through a transaction, they can fool you into paying them. Always double-check to make sure a company or product is legitimate before paying them.
Using more than one Bitcoin wallet is always a safe practice. That way, if hackers get into one, they won’t be able to access all your money. You may also want to use a VPN while accessing your wallet and update your operating system regularly.
Plan to Use Bitcoin? If So, Keep Your Data Secure
Bitcoin allows you to secure your finances more than you’d be able to with a credit card. It’s possibly the next step in digital currency, offering more financial freedom and safety. Just be sure that you don’t get too comfortable with its security.
You should be just as careful with Bitcoin as you are with traditional money. If you take the right steps to secure it, though, then you can use cryptocurrency without fear.
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Featured image: DepositPhotos © Frank-Peters
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