Cryptocurrency is an alternative to other currencies, it comes under different currencies like Bitcoin, Ethereum, Solana, Dogecoin, Tether, BNB, XRP, and many others. Its decentralized system makes it different from other traditional currencies. The most common reason for cryptocurrency is its usage of this in online transactions.
So, before approaching cryptocurrency you must know what cryptocurrencies are, whether cryptocurrency is safe, what are their risks, and what are their pros and cons. So let’s get started:
What is Cryptocurrency
Cryptocurrency is a digital currency developed by using blockchain, it is completely decentralized which means it is not owned by a centralized authority like banks or government, unlike other traditional currencies. Furthermore, it always stores transactions in a distributed ledger in a decentralized network and it uses a cryptography algorithm to ensure transaction security.
Is Cryptocurrency Safe
The main reason for cryptocurrency's popularity is its decentralized network and cryptographic algorithmic approach. Let’s discuss both approaches one by one. A decentralized network means each transaction would be verified by each node, and after verification, it would be stored on a distributed ledger. Each transaction is fast, cheap, transparent, and immutable. It ensures security by applying the cryptographic algorithm, furthermore, the encryption and hashing functions achieve confidentiality and integrity of each transaction.
Here are the following risks in cryptocurrency:
- The biggest risk in cryptocurrency is its fluctuating value and dramatically up and downs in it. For instance, an investment may be worth thousands of dollars today but there is also the possibility it could be down the next day.
- We always store crypto in hot or cold wallets; hot wallets store crypto online by using any cloud service. Moreover, you can fully own it by using a public-private key but there is a risk of the key being stolen by a hacker. In the case of a cold wallet, cryptocurrency would be stored offline on your computer devices but there is a risk of disk corruption, and forgetting pins and passwords.
- Social Engineering, DDOS Extortion, Ransomware, Cryptojacking, and Cryptocurrency Exchange Hack are the most common cyber-attacks by hackers on cryptocurrency.
- The usage of blockchain technology makes it decentralized, and it is not owned by a centralized authority like banks or any regulatory.
- Security assurance by using a cryptographic algorithm (encryption and hashing) to achieve confidentiality and integrity of the transaction.
- Immutable transaction means once the transaction is done no one can revert it.
- Transparency, and efficiency.
- Low fee cost.
- Volatile nature and fluctuation in value.
- Scalability Issues.
- Once the transaction is done you cannot revert it.
- It has security risks like key stolen, phishing attacks, 51% attacks, and many others.
- It takes time to understand and requires investment experience.
Cryptocurrency is a digital currency and you can utilize it as an alternative to other currencies, it is not owned by any centralized authority, unlike other currencies. As it is developed by using blockchain technology which is completely decentralized. It performs secure, immutable, transparent, and verified transactions using cryptographic algorithms.