Is Cryptocurrency Banking Secure?
Crypto banks function the same as normal banks but only deal with digital assets such as Bitcoin, Ethereum and Ripple. The services of crypto banking include the holding of crypto balance, making payments and providing interest on deposits.
As a result of the 2008 financial crisis, the vulnerability of the traditional banking system was exposed. People desperately wanted an alternate option which they received in the form of cryptocurrencies shortly after. There are many loopholes in crypto assets as well because, since 2011, more than 1.6 billion worth of digital assets have been stolen. In addition to this, the market cap of cryptocurrencies is expected to cross 1k billion by 2026. Due to these two reasons, the need and scope of crypto banking have increased exponentially.
How Is Crypto Banking Safer?
Cryptocurrency is created by using Blockchain technology. The blocks are time-stamped. That is why the transactions recorded on them are irrevocable. Although this is a lengthy and complex process, it creates a reliable and secure digital ledger. Digital currency transactions require two steps of authentication, which makes them even more secure. Being decentralized is also a great security benefit for cryptocurrency.
Users Themselves Are A Risk
The majority of traders don’t have sufficient knowledge of digital processes. This lack of knowledge results in not being able to use security procedures and two-way authentication. In this way, the chances of cyber-attacks increase. Major reasons behind the loss of cryptocurrencies are phishing attacks, SIM swap, loss of pins and confidence frauds. Keeping cryptocurrencies in exchange wallets for security reasons can also prove a human error because exchanges are attractive targets for hackers. Not just hacking and Ponzi schemes, exchanges are prone to administration related losses as well. A famous example of such controversy is QuadrigaCX, a cryptocurrency exchange whose owner died with passwords of 190 million dollars worth of cryptocurrencies stored in his mind which became unusable.
Steps To Be Taken
- Users must educate themselves about technology
- Available options must be compared before decision making
- Strong passwords should be created
- Security policies must be read thoroughly
- Make sure the trading platforms are using encryption or not
Keeping an eye on all this information, the users must read the terms and conditions before choosing services providers or crypto banks. The reliable companies maintain transparency at any cost to secure the crypto banking experience.
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