From tech millionaires to celebrities and athletes, everyone is talking about Bitcoin and cryptocurrencies. Cryptocurrency markets have generated a huge craze among people about the future that is primarily led by digitalization. But, as an investment instrument, is it actually safe?
The blockchain technology that runs the digital currency is famous for its unmatched security measures. It is one of the major reasons for the popularity of cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, and many more.
What are Cryptocurrency and Cryptography?
Cryptocurrency is digital money that is implemented by cryptography. It is used to trade, buy and sell services and goods. Cryptography makes cryptocurrencies unregulated and decentralized, which means that no third party or governmental organizations have any authority over your money. This nature of cryptocurrency puts investors at risk of market volatility and loss. However, while using Bitcoin or any other cryptocurrency, the security hazards and the danger of fraud are greatly reduced.
Hence, cryptography is the technology that is used to keep transactions safe and secure.
Blockchain Technology and its Working:
Blockchain is a platform for digital money transactions linked with cryptocurrencies and operates via cryptography such as Bitcoin, Ethereum, Dogecoin, and others. It is a global database of all cryptocurrency transactions. This technology is being used to store various data, including medical records, humanitarian aid data, and more.
Blockchain technology is similar to a digital ledger that is open to the general public. It allows you to make and record transactions in a secure manner. All crypto transactions are recorded and preserved as data on blocks. All of this data is time-stamped.
Blockchain technology makes cryptocurrency different from fiat currencies by making it decentralized. Since the data is distributed on the blockchain, it is very hard to hack or corrupt it. Blockchain and cryptography have made cryptocurrencies one of the safest assets to invest in the world. However, it is still not completely safe but chances of security breaches are very low.
What makes Cryptocurrency Unsafe?
The following are several risk factors that make investing in cryptocurrency not entirely safe:
- Cryptocurrency exchanges are at risk of cyber-attacks.
- Thousands of blockchain projects are competing with one another.
- Cutting-edge technology has inherent volatility.
- Regulations might hit cryptocurrency markets which can obstruct profitability.
How is Cryptocurrency Made Safer?
Despite the inherent dangers, cryptocurrencies and the blockchain sector continue to develop. As much-needed financial infrastructure is built, investors are increasingly able to get institutional-grade custody services. Professional and amateur investors are progressively gaining access to the tools they need to manage and protect their cryptocurrency holdings.
Many corporations are getting direct exposure to the cryptocurrency sector, and crypto future markets are being formed. For example, Square and PayPal, two financial giants, are making it simpler to purchase and invest in cryptocurrencies on their popular platforms. Other firms, including Square, have together invested in cryptocurrencies such as Bitcoin. In early 2021, Tesla, the electric car company, acquired $1.5 billion worth of Bitcoin.
While various factors continue to influence the riskiness of cryptocurrencies, the growing adoption rate indicates the industry development. Big companies and celebrities are connecting to the world of cryptocurrency, believing it to be a safe instrument for investment.
What to Consider when Investing in Cryptocurrency:
If you are investing in cryptocurrency, you should keep a few things in mind to enhance the safety of your cryptocurrency:
- Even if you choose an exchange to buy cryptocurrency, sell or store it. You are still at risk of hacking or theft. Make sure to choose a private wallet and keep your private keys to yourself. Never share keys with anyone.
- Make sure to research the cryptocurrency you are investing in. Most secure cryptocurrencies include Bitcoin, Ethereum, Dogecoin, and more.
- You can easily buy Bitcoin, Dogecoin or other cryptocurrencies by credit card, but you have to be cautious.
- Investing in crypto might come with risks but can be very beneficial to investors who are sharp and have knowledge about the cryptocurrency market.