By Vanessa Papas
From sporting superstar Lionel Messi, Luis Suarez, Floyd Mayweather and Lothar Matthäus to Hollywood stars Ashton Kutcher, Gwyneth Paltrow and Mel B, the number of real crypto-enthusiasts among celebs is growing rapidly. One-in-10 people use cryptocurrency to make a purchase. But what exactly is cryptocurrency and is it safe? We chat to Vitaly Mzokov of Kaspersky Lab on the ins and outs of cryptocurrency.
What is cryptocurrency? As the name suggests, the term cryptocurrency is a combination of the words ‘crypto’ and ‘currency’. We all get the ‘currency’ part. But what is ‘crypto’? The word crypto comes from the fact that most of the cryptocurrencies use cryptography principles for generation, transfers and so on. Cryptography is a branch of computer science that deals with encryption, decryption and passwords. Cryptocurrency is roughly the equivalent of using PayPal or a Debit Card, except the numbers on the screen represent cryptocurrency instead of currency like a rand. How does it work? Cryptocurrency works a lot like bank credit on a debit card. In both cases, a complex system that issues currency and records transactions and balances works behind the scenes to allow people to send and receive currency electronically. Likewise, just like with banking, online platforms can be used to manage accounts and move balances. The main difference between cryptocurrency and bank credit is that instead of banks and governments issuing the currency and keeping ledgers, a system does.
How do you get cryptocurrencies? Cryptocurrencies can be accessed through software called wallets (transactions are broadcast to the network to be added to the blockchain via transactions created in wallets). This can be equated to online banking (where you have account numbers and passwords and move funds between accounts).
How popular is cryptocurrency?
Despite a fall in cryptocurrency prices, there is still a strong desire for digital transactions amongst consumers. Consumer research has found that 13 percent of people have used cryptocurrency as a payment method, which was surprising to see.
Is it safe? Cybercriminals are targeting cryptocurrency exchanges and modifying old threats to attack investors. Hackers can use a wide range of practices to steal funds from crypto wallets, as well as cryptocurrency exchanges and ICOs. High profile cases, including when
120 000 bitcoins were stolen from segregated customer wallets on Bitfinex four and a half years ago, and when Coincheck was hacked for $530 million in 2018, demonstrate the insecurity of these exchanges and the ease with which cybercriminals can access live networks and cause extensive, irreparable damage. If all the money in a cryptocurrency exchange is stolen, then it simply closes, and nothing can be returned to investors. ICOs are particularly at risk because the individuals who set them up often do not have any background or experience in cybersecurity. This leaves them unable to protect funds and respond effectively should an incident take place. Ultimately, the cryptocurrency market still isn’t regulated and there are no risk assessment mechanisms in place.
What are the cons of cryptocurrency?
Crypto-investors who don’t store money on crypto-exchanges for security reasons, should remain aware they may face the following difficulties and inconveniences including exchanges usually incur service fees for withdrawing money; users cannot react to coin prices swiftly if they choose to remove their money and numerous operations with fiat money coming from anonymous sources can raise questions from government regulators.
How can I keep my funds safe: By always verifying a web wallet’s address and not following links to an online bank or web wallet; using cryptocurrency hardware wallets; double-checking recipient addresses, the amount being sent, and the size of the associated fee before sending a transaction; writing down a mnemonic phrase that allows you to recover a crypto wallet if you lose it or forget your password and installing high-quality security solution (such as Kaspersky Internet Security) to safeguard the devices you use to access crypto wallets and trade on crypto-exchanges.