What’s That Term?: Cryptocurrency
From Dogecoin to Bitcoin to Ethereum and more, cryptocurrency has exploded over the years as both a financial and social phenomenon influencing numerous global factors since its inception. Because of its impact on the world as a whole over the years, we’ll take a look at what cryptocurrency is and how it might affect you or your company's cybersecurity.
What is it?
Cryptocurrencies are digital or virtual tokens that use cryptography to secure their transactions and control the creation of new units. Cryptocurrencies run as a part of a blockchain which is basically a series of blocks that are connected to one another and record a history of each transaction for that block. They are also decentralized, meaning they are not subject to government or financial institution control.
The first cryptocurrency, which most people are probably familiar with by now was Bitcoin, and it was created in 2009. It is also still the most popular form of cryptocurrency, accounting for nearly 41% of all crypto at the end of 2021.
Cryptocurrencies are often considered to be a more secure form of currency than traditional fiat currencies because of the fact that they are not subject to government or financial institution control. They can also be used to purchase goods and services online and can be exchanged for other digital assets or traditional fiat currencies, meaning you can exchange them for US dollars or other currencies. However, you need some type of crypto wallet to do this.
Given the nature of what it is, crypto tends to have generally mixed reviews depending on your perspective. If you are a financial institution, they may be an unwelcome competitor to your traditional format whereas the laymen might enjoy their benefits based on the appeal of a deregulated currency.
That being said, cryptocurrency and its possibilities for the future are not without risk. Cryptocurrency scams are common, and cryptocurrency exchanges are often targeted by hackers. In addition, the value of cryptocurrencies can be highly volatile, making them a potentially risky investment despite typically being more secure than traditional forms of money. We'll discuss those more later on in the article, but now we'll discuss why and where you may have heard this term.
Why have you heard it?
Cryptocurrency is a somewhat ubiquitous term now, having been around for over a decade. It has definitely changed the digital landscape and even the global economy to a certain extent. It is ingrained in our culture with the term Bitcoin having become synonymous with the whole of cryptocurrency much like Q-tips are with ear cleaners and Kleenex with facial tissues.
It has also frequently been the feature of many news segments since its inception and in recent years because of its security features and the scams that have developed over time that are associated with it. Because cryptocurrency is digital, it's harder to steal than traditional currency, and because cryptocurrency transactions are anonymous, they're perfect for criminals who want to avoid getting caught.
However, these same features have also made cryptocurrency a target for scammers. Unfortunately, many people have lost money by investing in cryptocurrency schemes that turned out to be scams. Despite these setbacks, cryptocurrency remains a powerful tool for online security and privacy. As more people become aware of its potential, cryptocurrency is likely to become even more popular.
In fact, it has become incredibly common all across the globe. Many countries are starting to make infrastructure with crypto in mind. For example, El Salvador is the first country where you can use Bitcoin as legal tender. While not to that same level, other countries such as India are developing a framework for crypto, and Japan already considers Bitcoin legal property.
Likewise, the US is figuring out ways for the IRS to tax people based on their crypto holdings. While that may be a bummer and seemingly defy the whole purpose behind cryptocurrency, it shows how big a player it has become across the globe.
Our Advice
Cryptocurrency is a mixed bag for a lot of people. It has inspiring positive aspects to it as well as some disheartening negative ones. It may be difficult to determine which side of the fence to be on in the matter since it really depends on what you are using it for and if the benefits involved outway the risks for you.
Positive aspects:
Cryptocurrency is a secure way to transfer money given the way blockchain can track each interaction.
Cryptocurrency is a global payment system meaning it broadens horizons for everyday financial transactions.
Cryptocurrency has the potential to revolutionize how we interact with the digital world with many more aspects and utilities yet to be discovered.
Negative aspects:
Cryptocurrency is not regulated by governments or banks, which means that its value is highly volatile and can change rapidly.
Cryptocurrency transactions are irreversible, so if you send cryptocurrency to the wrong person or account, you may not be able to get it back.
The cryptocurrency market is unregulated, meaning that there are no rules or regulations governing how exchanges and brokers operate. This can lead to fraud and manipulation of prices.
Cryptocurrency mining can be expensive and uses a lot of electricity which can harm the planet.
Cryptocurrency is susceptible to scams and hacking. Because cryptocurrency is digital, it can be easy for hackers to steal coins from unsuspecting users.
Some of these scams include:
1. Phishing scams
Phishing scams are one of the most common types of cryptocurrency scams. In a phishing scam, the victim is tricked into clicking on a link or opening an email that looks like it is from a legitimate company, but is actually from a scammer. The goal of a phishing scam is to steal the victim's login credentials or cryptocurrency wallet address.
2. Fake cryptocurrency exchanges
Fake cryptocurrency exchanges are websites that look like legitimate cryptocurrency exchanges but are actually just scams. These fake exchanges will often promise high returns or bonuses, but will then steal the victim's money.
3. Ponzi schemes
Ponzi schemes are investment schemes that promise high returns, but instead, use the money from new investors to pay old investors. Cryptocurrency Ponzis are especially dangerous because they can be difficult to spot and often target inexperienced investors.
4. Mining scams
Mining scams are websites that claim to offer cryptocurrency mining services, but actually just steal the victim's money. These scams often require the victim to download software or give up their login credentials.
5. Fake ICOs
Fake ICOs (Initial Coin Offerings) are cryptocurrency crowdfunding campaigns that are actually just scams. The scammer will often promise high returns or bonuses, but will then simply take the victim's money and disappear.
How to protect yourself from becoming a victim
1. Do your research
Before investing in any cryptocurrency, be sure to do your research and understand what you're buying and who you're buying from.
2. Keep your cryptocurrency in a secure wallet
One of the most common ways scammers will try to steal your cryptocurrency is by getting access to your wallet. By keeping your cryptocurrency in a secure wallet, you can help protect yourself from theft.
3. Be careful who you trust
When dealing with cryptocurrency, it's important to be careful who you trust. Don't just send money to anyone without knowing who they are and what they're doing with your money.
4. Use a reputable exchange
When buying or selling cryptocurrency, be sure to use a reputable exchange such as Coinbase or Binance. These exchanges have built-in security measures to help protect users from scams.
5. Watch out for red flags
There are a few red flags that can indicate you're dealing with a scammer, such as promises of guaranteed returns or pressure to buy immediately. If you see any of these red flags, be sure to proceed with caution or notify a trusted source for your cybersecurity.
Cryptocurrency has been around for almost a decade and, during that time, it has seen its fair share of both positive and negative aspects. On the one hand, cryptocurrency is secure, anonymous, and decentralized; on the other hand, it is susceptible to scams and hacking attacks. Despite these risks, cryptocurrency continues to grow in popularity due to its many advantages over traditional currency. As cryptocurrency becomes more mainstream, businesses and individuals must be aware of both the benefits and drawbacks of using it in order to make informed decisions about whether or not to adopt it into their lives. The team at Kotman Technology can help you and your business better understand any cybersecurity threats that may come your way including crypto based scams.
Kotman Technology has been delivering comprehensive technology solutions to clients in California and Michigan for nearly two decades. We pride ourselves on being the last technology partner you'll ever need. Contact us today to experience the Kotman Difference.