Top 5 threats to cryptocurrencies

Cryptocurrencies are anonymous and simplify many financial transactions. Is digital money so convenient to use?

Digital money, or cryptocurrency, is very similar to text files. And the corresponding transactions are no more complicated than sending emails to friends. Cryptocurrency owners can send it directly, without the participation of banks and other intermediaries. To do this, you only need to know the wallet number. Name, country, or phone number is optional: most cryptocurrencies are anonymous. For example, Bitcoin, which, according to CoinMarketCap (an analogue of Forbes for cryptocurrencies), accounts for 40% of the total cryptocurrency market capitalization, works this way.

The total capitalization of the cryptocurrency market today is $ 138 billion. More than a thousand of their types are already functioning. But do not rush to invest in cryptocurrency without a balanced assessment of some of the risks.

Top 5 threats to cryptocurrencies

Top 5 threats to cryptocurrencies

1. Instability of the cryptocurrency rate

Cryptocurrencies do not have a single rate. For example, the bitcoin rate can change several times a day. Some people try to make money on this: to have time to buy digital currency at a lower price and sell it at a higher price. However, while the sale is taking place, bitcoin manages to change its course several times. Therefore, his fans should be prepared for the loss of investment.

Most cryptocurrencies are decentralized; they do not have a single bank to control the entire system. Their course depends on the trust of users. After hackers hacked one of the largest bitcoin exchanges in July 2017, the bitcoin rate fell from $ 2.6 thousand per unit to $ 1.9 thousand. Trust in the cryptocurrency was lost, although the hackers did not hack Bitcoin itself, but only a third-party system.

The editorial staff of the magazine The Outline, which tells about the digital world, suggested that the rate of cryptocurrencies grows when they are talked about or written about. One of The Outline's journalists found that most of the colleagues who cover the topic of cryptocurrencies have Bitcoin accounts. And after the publication of some articles, the bitcoin rate may change. So there is a possibility that if they stop talking about bitcoin, it will lose some of its value.

2. Cryptocurrency system errors

Functioning cryptocurrencies such as Bitcoin did not appear until 2009. So all of them are currently under development and bug fixes. For example, in August 2017, Bitcoin split into two independent cryptocurrencies - Bitcoin and Bitcoin Cash. Too many people began to use the bitcoin system, and bitcoin's throughput was limited to seven transactions per second. For example, Visa and Mastercard payment systems produce about 2000 transactions per second.

Many Bitcoin users have decided to tamper with the code and improve Bitcoin. However, another part of the users wanted to leave the old system. The complication of the system would lead to an increase in the requirements for miners' computing power (cryptocurrency miners - Ed. ), Which means that not everyone would be able to mine bitcoin.

Changes to the system cannot be accepted until all decentralized cryptocurrency system users agree with it. Since no compromise was reached between the two sides, bitcoin split into two parts. The same happened with another cryptocurrency Ethereum - after hacking by hackers, it was divided into two parts.

Important Things To Know About Cryptocurrency Glossary Of Terms

3. The likelihood of a financial bubble

Robert Schiller, the winner of the 2013 Nobel Prize in Economics, believes that Bitcoin is the best example of a speculative bubble. He stated this in an interview with the Quartz resource specializing in technology, the Internet, and business.

A financial bubble occurs when too much money is behind a small number of assets, causing those assets to be overvalued. There is a legend (it is often told to students of universities' economic specialties) about the recognition of a financial bubble. In 1928, before the Great Depression in the United States, a prominent banker heard a question from his shoe shiner: "Should I sell stock in a railroad company?"

It is not known what the banker answered; however, returning to the office, he ordered to sell all the shares of this company. A few days later, she went bankrupt. The banker decided that if the shoe shiner had already acquired shares in this company, then a professional investor should withdraw his funds as soon as possible.

4. Anonymous doesn't mean safe.

Due to the inability to trace who owns the cryptocurrency, it is popular with hackers, arms, and drug dealers. Thus, cryptocurrency simplifies the flow of funds between criminal gangs. In August, hackers demanded a ransom from HBO for a stolen Game of Thrones script. The ransom in the amount of $ 6 million was supposed to be paid in bitcoin cryptocurrency. Cryptocurrencies are often used by members of the darknet, a private network whose users are difficult to track down due to non-standard communication protocols.

Lost bitcoins cannot be returned due to anonymity. For example, programmer James Howells lost his hard drive, which was storing data on 7,500 bitcoins. But since the bitcoin system is anonymous, Howells had no way to prove that he was the lost bitcoins owner. And if a person loses his private key, the system is so secure and anonymous that it cannot be restored.

5. Hackers and their new viruses

New technologies give rise to new threats and viruses. And some greedy hackers have figured out how to make money on cryptocurrency. In addition to the fact that a Bitcoin wallet can be stolen due to the computer's vulnerability, hackers come up with new means of mining cryptocurrencies. Kaspersky Lab announced the existence of miner viruses and about 9000 computers infected with this virus.

Anton Ivanov, an antivirus expert at Kaspersky Lab, told DW that the main way to install a miner virus is through adware (software) installers distributed using social engineering. The user is looking for legal software on the Internet. But on the search results, he comes across links to malicious resources, where he downloads this malicious software under the guise of a normal program.

After the virus is installed, it starts performing computational operations on the victim's computer. As a result, the attacker receives a reward that is transferred to his wallet. Various mechanisms are used to conceal the virus. There are types of viruses that suspend the mining process (cryptocurrency mining) if the user launches certain applications (games, graphic editors, etc.). Therefore, the work of the miner virus is not always noticeable.

Anton Ivanov noted that to detect a miner virus, attention should be paid to computer performance and increased electricity bills since a computer operating at full capacity consumes more power. To remove the miner virus, you need to install a security program. It is almost impossible to remove a virus program manually since it is able to recover in the system. Ivanov assured that all Kaspersky Lab products could already cope with this group of viruses.


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