Security and risk are big issues for newcomers to Bitcoin. Maybe all they’ve heard is the mainstream media narrative of bitcoin hacks, crimes, and technical difficulties. While these generally have nothing to do with bitcoin itself, users still need to understand what they’re doing.
To date, there has not been a successful attack on the Bitcoin network itself. Any thefts, hacks or losses you may have heard about about happened at centralized third-party services due to weaknesses in their own software, procedures, or were perpetrated by their own staff.
In many ways, Bitcoin is more secure than a credit card. If a hacker steals your personal data from a store where you paid with a card, they have access to your entire account. If you paid in bitcoin, they have nothing.
But we’ll be honest: the freedom of using bitcoin does bring added responsibility. Probably more responsibility than you’d take with your bank, credit card company or online payment processor. Since bitcoin is an open, decentralized protocol, there’s usually no support line to call if something goes wrong. In most cases, your funds aren’t insured and no-one will replace them if stolen.
Most bitcoin users have never lost any money. But in order to use bitcoin responsibly, you should be aware of the following risks:
The risks here are similar to those of any other digital money account. If your account is online, you’ll need to keep your login credentials secret. Don’t use easily-guessable passwords, and don’t store all your bitcoins in the one place.
Some also advise not to advertise the fact that you own bitcoin, as it may make you a target. This is a personal choice, but anonymity could provide an extra layer of security.
Data Loss Risk
These days, it’s possible to recover a bitcoin wallet even if you lose or break your mobile device — as long as you remember the recovery phrase/password. However, it’s still possible to lose control of your private keys. There have been several instances of users accidentally deleting wallets from their computer hard drives, forgetting recovery phrases/passwords, and losing paper-printed keys.
See our section on avoiding scams for more information on this. Be aware that many criminals are hauling out investment scams, ponzi schemes and other frauds from the past in order to try them on a less financially-savvy new market.
The price of bitcoin in your local fiat currency has fluctuated widely in the past, and it can be unpredictable. While the bitcoins you just bought may be worth $200 more tomorrow, they could also be worth $200 less.
Does all this make bitcoin less, or more risky than other payment systems? Let’s hear your thoughts.
Now that you know about some of the risks involved in using Bitcoin, you may have even more questions, such as:
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