Bitcoin is a secure payment method

What are cryptocurrencies? Cryptocurrency Security: Four Tips for Safe Cryptocurrency Investing

Technology has fundamentally changed the way we work, communicate, shop, and pay for goods. Vendors and consumers prefer cash less and less, which paves the way for alternative payment methods such as. B. Apple Pay paves. Customers can pay for items at digital cash registers by simply holding their smartphone in front of a corresponding sensor. But currently another payment system is making headlines: cryptocurrencies.

By now everyone has probably heard of Bitcoin. It was the first cryptocurrency that made it to the general public, but other currencies are also becoming increasingly popular. There are currently over 2000 different types of cryptocurrencies and new ones are added every day.

Studies show that most consumers have heard of cryptocurrencies before but don't know exactly how they work. So what are cryptocurrencies, how secure are they and how can you invest in this market? We have put together an introduction to this in which these questions are answered.

What are cryptocurrencies?

A cryptocurrency is a digital payment system that does not rely on banks to verify transactions. It is a so-called peer-to-peer system in which any user can make and receive payments anywhere. Instead of physical money that is exchanged in the real world, cryptocurrencies only exist as digital entries in online databases that describe the individual transactions. When you transfer cryptocurrencies, the transactions are recorded in a public register. You keep your own crypto money in a digital wallet (cyber wallet or e-wallet).

Cryptocurrencies owe their name to the fact that encryption is used to verify transactions. This means that a complex coding is used when storing and transferring cryptocurrency data between e-wallets and the public register. The aim of this encryption is to increase security.

How safe are cryptocurrencies?

Cryptocurrencies are usually based on blockchain technology. “Blockchain” describes the type of recording of transactions in so-called blocks and with a time stamp. The technological process is extremely complex, which makes the digital register of crypto transactions difficult for hackers to crack.

In addition, all transactions require two-factor authentication. For example, users have to log in with their username and password to start a transaction and then enter an authentication code that was sent to their cell phone via SMS.

But although there are various security mechanisms in place, that does not mean that cryptocurrencies are unhackable. In fact, some crypto start-ups have already lost large sums of money to hacking. In 2018, Coincheck hit $ 534 million and BitGrail hit $ 195 million. These are the two biggest cryptocurrency hacks of 2018, according to Investopedia.

Four tips for safe investments in cryptocurrencies

Investments always involve risks. But as Consumer Reports reports, some experts believe that investing in cryptocurrencies is one of the riskier options. However, digital currencies are currently one of the most sought-after goods. Earlier this year, CNBC estimated that the cryptocurrency market would hit $ 1 trillion by the end of 2018. So if you want to invest in cryptocurrencies, we can support you with the following tips.

Find out about stock exchanges

Before you invest a penny, you should read up on the various crypto exchanges. These platforms offer features to buy and sell digital currencies - and according to Bitcoin.com, you have 500 different exchanges to choose from. This is why you should do your research, read reviews, and speak to knowledgeable investors before proceeding.

Find out how to store your digital currency

When you buy cryptocurrencies, you have to store them somewhere too. To do this, you can use an exchange or an e-wallet, e.g. B. one of the crypto wallets in our blog post Choosing the right cyber wallet. There are different types of wallets, all of which offer different advantages, technical requirements and security functions. As with exchanges, you should study carefully choosing the right wallet before investing.

Diversify your investments