Since its creation in 2009, Bitcoin, the first and best-known cryptocurrency in the world, has had many ups and downs.
One bitcoin was essentially useless when it first started.
In May 2010, Laszlo Hanyecz purchased two pizzas for around 10,000 bitcoins, marking the first bitcoin transaction for the purchase of tangible items (BTC). The cost of those pizzas would have been approximately $650 million USD at the highest recorded price of bitcoin, which was almost $65,000 USD per coin.
However, this year Bitcoin witnessed a fall of roughly 60%. In the meanwhile, the absence of a regulatory framework led to an increase in crypto crimes. The Federal Trade Commission estimated that bitcoin fraud cost INR 27 billion in just the first three months of this year.
Despite the cryptocurrency market's volatility, advocates of Bitcoin have consistently argued that it provides anonymity and security that traditional money cannot. That's not actually true, though. Contrary to popular belief, Bitcoin is not at all secure or private.
Bitcoin privacy issues
Bitcoin does include some privacy precautions that most fiat currencies do not, such as the ability to create addresses that are unrelated to a person's identity. But it's not at all private. Here are the primary three justifications.
Transactions are openly disclosed
The blockchain, a public ledger, contains a record of every Bitcoin transaction. This implies that every transaction is visible to everyone who has access to the blockchain and that anyone may see all the transactions connected to a specific Bitcoin address. A threat actor or law enforcement agency might track every transaction you ever made if they were able to connect your Bitcoin address to your identity.
The Use of Third-Party Services Required
Bitcoin is dependent on outside services. For instance, you must register with an exchange if you want to purchase Bitcoin. The vast majority of exchanges demand multiple forms of identity verification from users. Your name, email address, street address, and other details are all covered by this. Most will also require a photo of an ID issued by the government.
Government surveillance
Governments worldwide are warming up to the idea of regulating Bitcoin since it has long been favored by criminals of all sorts. However, surveillance also endangers privacy in addition to controlling it. Law enforcement organizations swiftly adjusted to this new reality and now employ blockchain analysis to identify Bitcoin users and track their transactions.
Even if you don't mind a third-party service knowing your identity, consider what may happen if it experienced a data breach.
How to Safeguard Your Bitcoin
The safety of your Bitcoin largely depends on how you store it. Your choice of crypto wallet and the degree of encryption it employs are key factors in ensuring the security of your currencies.
Ryan Burke, general manager at Invest at M1 asserts that convenience and security are not always mutually exclusive.
Although less practical than hot wallets, he claims that offline "cold" wallets that are not connected to the internet are safe against attack. Cold wallets can also be stolen or destroyed. Burke warns that if you misplace your private key or lose a device or drive, you will have trouble.
Because you can access your cryptocurrencies from everywhere there is an internet connection or phone service, hot wallets are more practical but also more prone to hacking.
“A prudent strategy is to use a combination of hot and cold storage, with most assets being held in cold storage,” Burke added.
Before registering for a wallet or service, experts advise reading the terms and conditions so that your bitcoin doesn't unintentionally become another victim of the crypto liquidity crisis. Investigate whether buying Bitcoin is a good fit for your financial portfolio, just like with any other investment. Be ready for highs and lows if you decide to purchase BTC as part of your investing plan.
