Cryptocurrency’s growth in popularity is now (finally!) being matched by its growth in accessibility and with that growth has come increased issues of cybersecurity.
Until recently, those looking to buy, sell or trade cryptocurrency would have to go through the tedious process of getting set up on a cryptocurrency exchange; a process so unexpectedly cumbersome that it deterred many would-be investors.
Today, however, familiar money transfer services like Venmo, Cash App, and PayPal are starting to jump on the digital currency train. While this expansion of services is undoubtedly due to the increased demand for the option, it carries the benefit of removing barriers, thus opening up cryptocurrency to those who were always interested in dabbling with the digital trades but found the exchanges too complicated.
Mind you, the steps that these companies are taking can best be characterized as baby steps: out of the thousands that exist, Venmo and PayPal support only four types of cryptocurrencies (Bitcoin, Ethereum, Litecoin, and Bitcoin Cash), while Cash App only supports Bitcoin.
These are exactly the kinds of small steps that beginning investors should be taking, too. Anybody looking to purchase or trade cryptocurrency should, above all, ensure they know what they’re getting into before they put any money on the line. Here’s why:
Cryptocurrency is a virtual currency secured by cryptography, usually based on blockchain technology, making it nearly impossible to counterfeit or double spend.
However, that does not make it immune to loss or theft.
Cryptocurrency transactions and storage can be vulnerable to hacking or security lapses, in the same way regular bank transactions or accounts might be. Unlike a regular bank account or transaction, though, cryptocurrency is not protected by the types of consumer regulations you might be used to. As a result, if your Bitcoins are stolen, you may have no recourse to recover your investment.
Protecting Your Digital Investments
This higher level of risk means that those who choose to trade in cryptocurrency have a greater responsibility to:
- Follow best practices in researching their investments.
- Familiarize themselves with the ins and outs of cryptocurrency trading.
- Utilize cybersecurity training and security protocols that minimize the risk of fraud, loss, or accidents.
Thus, the first step in profitably investing in cryptocurrency is not making the right purchase—it’s taking the time to educate yourself before you put any money on the line.
Potential investors should also consider the exchange’s security used for their purchases or trades. Ideally, information systems that make use of cryptocurrencies (such as exchanges, mobile and web applications, and storage solutions) should adhere to the Cryptocurrency Security Standards, a framework designed to complement existing information security standards with respect to cryptocurrencies.
They should also understand the pros and cons of using hot (online) wallets versus cold (hardware) wallets and take the time to learn about personal security practices that limit the risk of unauthorized access and theft. Hardware wallets take your bitcoin information off the internet and store it on a local device. This could be a mobile app, a desktop computer, or even a USB key. Web wallets are cloud-based.
Corporations and Cryptocurrency
An increasing number of law firms, including members of the AM Law 200, are now accepting payments by cryptocurrency.
Law firms and corporations need to adopt a posture of heightened cyber vigilance when choosing to support the use of cryptocurrency. Without the proper training and safeguards in place, you’re opening the door for your funds to be hacked or hijacked, risking both financial and reputational damage.
Rather than jumping in and remediating security gaps later, companies should put policies and procedures in place to protect the integrity of cryptocurrency holdings and transactions before problems occur.
Whether you’re an individual on the point of investing in cryptocurrency or a company introducing the use of digital currency in your business environment, a diligent approach to security can minimize your exposure to costly trouble.