Bitcoin is very safe as a protocol, which means that the only way you could ever lose your bitcoins is if you made a mistake with your transaction. Like with many other things, people are the most significant security risk in Bitcoin, and, as we all know, humans are much more challenging to repair than code. Two incidents from last month demonstrated just how far we have to go before solving the Bitcoin security problem. According to court documents, federal prosecutors accused BitMEX, a cryptocurrency brokerage firm, of aiding unregistered trading offenses at the beginning of October. One of the biggest global cryptocurrencies halted withdrawals two weeks later when one of its key holders failed to show up at the trade. Before we get ahead in our guide, please make sure to register yourself on bitcoin-profitapp.com and learn all the latest trends in the world of bitcoin currency.
As Noelle Acheson observed, these tales illustrate one of the most ironic aspects of the bitcoin market: a sector founded on the principles of decentralization is now ruled by centralized companies vulnerable to centralized attack vectors and weaknesses. One of Bitcoin’s most essential characteristics, decentralization, has been lost somewhere along the way. Not everyone indeed believes this; nevertheless, a significant percentage of both new and seasoned Bitcoiners continue to think, erroneously, that their bitcoin is secure and that someone else has the keys to their wallet.
On-Exchange Transactions Are Unsecure
Let’s be clear: there would be no Bitcoin ecosystem if exchanges didn’t exist at all. Period. The issue is not with these sites themselves but with the notion that a bitcoin exchange is the safest location to keep the cryptocurrency in question. It’s not difficult to comprehend how this occurs. It is common for people to make the error of thinking that bitcoin works in the same way as currency and that the best method of protecting coins is to transfer them to a third party that can secure them using enterprise-grade security technology. A significant distinction exists between bitcoin and conventional forms of money; however: unlike cash, you never “own” bitcoin; instead, you only possess the keys that allow you to manage them on the bitcoin blockchain.
Because of this, Bitcoiners who aren’t aware of it may think that they are placing their money into a digital Fort Knox, while in reality, they have just ceded full control (and therefore ownership) of their bitcoin to a third party. Moreover, if the bitcoin is mishandled and lost by a third party, it will never be found again. The only method to guarantee that your bitcoin is very safe is to store your keys in a cold-storage wallet on your own computer system. So, what exactly has gone wrong? Why is it that this message is not getting through to more Bitcoin users? And why aren’t cryptocurrency exchanges educating their clients on the best practices for keeping their money safe from theft or hacking?
The most apparent explanation is that it is advantageous for exchanges to retain their clients’ Bitcoin keys since it makes it simpler for individuals to engage in active trading. It is conceivable that a business will wish to maintain control over the keys that protect bitcoin for other, less savory reasons, but the primary motive is to make the whole process of purchasing bitcoin, trading bitcoin, and storing bitcoin as smooth as possible. However, if they come at the expense of making Bitcoin substantially less secure, then all of these benefits are rendered insignificant.
Putting Security in The Hands of The Users
Bitcoin has had such an impact on the globe in such a short period that it is easy to forget how recently it was launched. If we look to enhance user education, we must remember that it takes time for regular people to understand any new information security idea. Self-custody is no exception to this rule.
That our sector has, whenever feasible, stolen terminology and ideas connected with fiat currency, which serves as terrible analogies for describing an entirely new concept of money, hasn’t helped things much either. After all, bitcoin wallets do not contain any bitcoin in the same way conventional wallets do not manage fiat: they store your private keys in encrypted form. We must educate the public so that they would not place their faith in a stranger with their cryptographic keys any more than they would trust a stranger with their home keys.
Bitcoin Is the Only Currency That May Be Purchased
To protect oneself from market volatility, it is advisable to have a diversified portfolio. Not only do you need to diversify your portfolio by investing in non-crypto assets, but you may also wish to diversify your crypto investments. Consequently, you won’t be putting all of your eggs in one basket if Bitcoin goes bust. As a general rule of thumb, you should not invest more than 5 percent to 10% of your portfolio in cryptocurrency. Examine well-established — and possibly safer — assets such as equities, mutual funds, and real estate for the remaining 90 percent to 95 percent of your investment portfolio.
There are many cryptocurrencies to select from if you wish to diversify your cryptocurrency portfolio’s composition. Each currency comes with a white paper that you can read to understand better what the coin will accomplish and who will be engaged. Another method by which fraudsters defraud investors is via the use of fictitious coins.