Bitcoin and other cryptocurrencies are constantly making the news for their volatile prices. But did you know that Bitcoin is actually more secure than some financial systems? Keep reading to learn why Bitcoin is mostly safe, how it works, and how to keep your digital assets secure.
Why is Bitcoin safe?
Bitcoin technology is mostly safe because it’s built on secure technology: the blockchain. Bitcoin is also cryptographic, public, decentralized, and permissionless. As an investment though, Bitcoin may not be safe due to market volatility. Here are the four main reasons why Bitcoin tech is (mostly) safe:
Reason #1: Bitcoin uses secure cryptography
How is Bitcoin secure? Bitcoin is backed by a special system called the blockchain. Compared to other financial solutions, the blockchain is an improved technology that relies on secure core concepts and cryptography.
Blockchain uses volunteers — lots of them — to sign hashes that validate transactions on the Bitcoin network using cryptography. This system makes it so transactions are generally irreversible, and the data security of Bitcoin is strong.
Reason #2: Bitcoin is public
While being public may not sound safer, Bitcoin’s ledger transparency means that all the transactions are available to the public even if the people involved are anonymous. That makes it very difficult to cheat or scam the system.
With all the data publically available, there’s nothing for bad actors to “hack in” and see — all transactions are public to everyone.
Compare that to the common data breaches of traditional companies, and Bitcoin starts to sound a lot safer. When you buy or sell bitcoin, you don’t add any personal information to the blockchain like your passwords, credit card numbers, or your physical address, so there’s nothing to leak.
That’s very different from when hackers break into traditional financial systems — just ask the folks over at Equifax.
Reason #3: Bitcoin is decentralized
Bitcoin’s distributed network has over ten thousand nodes all over the world that keep track of all transactions happening on the system. This large number of nodes ensures that if something happens to one of the servers or nodes, others can pick up the slack.
It also means that trying to hack into one of the servers is pointless. There’s nothing there you could steal that the other nodes and servers couldn’t prevent, unless you happen to control 51% of the nodes — not impossible, but extremely unlikely.
Reason #4: Bitcoin doesn’t require permissions
Being public and decentralized means very little if you have to be allowed in by some authority. With no regulatory body, Bitcoin is open to everyone. Its lack of permissions keep Bitcoin open and fair for everyone.
Bitcoin security issues
While Bitcoin technology is pretty safe, there are some risks to consider before you make an investment. Bitcoin isn’t anonymous, the price of cryptocurrencies can be extremely volatile, Bitcoin relies on passwords, and cryptocurrency wallets are not immune to theft.
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Bitcoin isn’t anonymous
While Bitcoin does disguise your personal information, it doesn’t disguise the address of your crypto wallet. That means you’re not “anonymous” but “pseudonymous” — and someone could use clues to track down your personal information. Governments can subpoena information, and cybercriminals use all kinds of illegitimate ways to obtain information.
Because all the ledgers are public, if someone knew how much you spent, when, and where you spent it, they could find your transaction on the ledger and trace it back to your wallet. Once they’ve done that, they could map your spending habits, gather data on your life, and maybe even blackmail you.
But with the current amount of web tracking these days, it’s far more likely that advertisers or data brokers are spying on your private business through your internet browsing.
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