Cryptocurrency is now the best-preferred mode for financial exchanges over the internet. Despite various hurdles such as fluctuations, cryptocurrency provides the most secure means of exchange as it involves several encryptions. Most people like cryptocurrency because it’s anonymous since it’s decentralized (meaning no central bank controls your funds) and you can transact from one user to another without using intermediaries.
The most commonly used cryptocurrency is Bitcoin. Bitcoin uses blockchain technology – transactions are recorded in a public ledger and verified cryptographically by various nodes in the network. This blockchain technology makes it hard to steal or forge bitcoins as you have to hack all the nodes in the network which is an impossible task due to the encryptions involved.
Besides the encryptions and security involved, you might have heard headlines that millions of cryptocurrencies have been stolen here and there. This is a vulnerability in the online exchange wallets and hubs. Since hackers can’t hack into the block chains, they take advantage of these exchanges and steal funds from unsuspecting users. The best thing is also the worst thing in cryptocurrency – anonymity. Once the funds are stolen from your account, you can’t track them.
Cryptocurrency security risks
Besides exchanges being vulnerable, here are some security risks associated with cryptocurrency;
- ICO fraud – Initial coin offering is a source of capital for cryptocurrency startups. This capital is in the form of other cryptocurrencies. At times, some deals might be fake and can result in loss of your funds.
- Fake trading exchanges – Some exchanges are built up just to steal your funds since you will give them freely. Always ensure your trading exchange is reputable.
- Hackable offline wallets – As much as you might want to avoid online, some offline wallets have been known to be hackable. Trojans such as Pony loader have been known to identify offline wallets and then steal from them.
- Crypto-jacking – This form of security risk involves malicious actors hijacking your devices and using their resources such as CPU to mine cryptocurrency. This significantly slows down your system performance. It’s usually done via malware mining scripts.
- Phishing attacks – Even cryptocurrencies are not immune to these old evolving attacks. According to Coin telegraph, a phishing attack on Electrum Wallet stole almost $1million worth cryptocurrency in one hour.
Can a VPN protect you against cryptocurrency security risks?
A VPN can protect you against various cryptocurrency security risks but not all. Due to the strong encryptions involved, a VPN can help you against some phishing attacks and crypto jacking in which the mining malware is injected using free public Wi-Fi. A VPN will encrypt your internet traffic, and this will make it invisible to prying eyes, and hence it won’t be intercepted or susceptible to prying eyes.
A VPN can also help you carry out cryptocurrency transactions in areas where there’s heavy government surveillance. Besides the encryptions, a VPN assigns you a virtual IP address which masks your real IP and hence hides your location.