Cryptocurrency continues to make big headlines in the financial press, but not all of it is positive. Reports of cryptocurrency theft are appearing with increasing frequency. As blockchain technology and cryptocurrency are supposedly valued for their privacy and security, this is a problem that needs to be addressed.
Results from an April 2022 survey of 1,037 Americans conducted by GOBankingRates seem to confirm this sentiment. Of the 77% who indicated they did not invest in crypto, 17% indicated they don’t think it’s regulated enough, while 26% don’t trust the security around it.
If cryptocurrency is ever to become either a complement to or an outright replacement of fiat currency, it will need to become more secure. Here are some suggestions from industry experts about how to accomplish that.
More Regulation
In spite of all of the gains in legitimacy that cryptocurrency has enjoyed over the past few years, it still remains something of the Wild West when it comes to any type of regulation or oversight. To help the crypto networks of the world become more secure, both for owners and investors, regulation will be required, even if many crypto enthusiasts fight against that very thing.
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According to Tally Greenberg, head of business development at the hosting, staking and monitoring platform Allnodes, “Regulations will come up and they have to come up at some point, which would stabilize the market even further. That protects investors, so it’s a good thing. It’s not a bad thing.”
Cold Storage
An important part of securing cryptocurrency lies with individual investors and owners themselves. There are two options for storing crypto: hot and cold. Whereas a hot wallet is easily accessible online, a cold storage wallet requires a private key to access.
With cold storage, “The only way that funds can be moved is if you have the private key, and that’s why securing private keys is so important,” said Parker Lewis, the head of business development at Bitcoin custody and loan firm Unchained Capital.
Brandon Hoffman, chief information security officer at Netenrich, concurs, saying, “The safest way to store your private key is by using cold storage … (which) essentially means printing out your key and removing all digital traces of it.”
Multi-Factor Authentication
Multi-factor authentication is another step that users can take to help keep crypto more secure. However, as the $35 million hack of Crypto.com in January 2022 demonstrated, even two-factor authentication is not always sufficient.
The chief security officer at Coinbase, Philip Martin, suggests that crypto users should also invest in a YubiKey, which is an additional USB authentication device. According to Martin, the device is “the gold standard for two-factor authentication.”
Avoiding Scams
According to some analysts, the problem with securing Bitcoin lies with the complacency of users, rather than the crypto itself. James Ledbetter, CNBC contributor and editor of fintech newsletter FIN, says, “It’s not like there’s something intrinsically unsafe about Bitcoin itself. It’s more how people are handling or managing it.”
The Federal Trade Commission notes that cryptocurrency scams are on the rise, especially via “emails trying to blackmail someone, online chain referral schemes, or bogus investment and business opportunities.”
More Secure Protocols
In spite of the purported anonymity and security of Bitcoin, transactions are actually recorded in the public ledger known as the blockchain. The details of the transactions and users are kept private, but the fact remains that Bitcoin transactions are all publicly accessible, although hard to obtain.
According to Kiana Danial, the author of “Cryptocurrency Investing for Dummies”: “Security and privacy are two separate topics. … In order to download the Bitcoin blockchain, you would need massive, massive computing capacity, like a supercomputer. … The day-to-day average Joe can’t go in and see what transactions are happening in the Bitcoin blockchain.”
But Bitcoin transactions may not be as completely secure and private as some think. Many newer cryptocurrencies have developed protocols that are specifically focused on total privacy. If these characteristics can become the industry standard, they could help the market as a whole become more secure.
