Problems and Risks of Cryptoсurrencies
November 17, 2017
It is well known that cryptocurrencies, by and large, are a kind of electronic money, that’s why electronic payment systems can face all the common problems. Besides, a number of specific principles cryptocurrencies based on make such problems more likely to arise, and the consequences might become more serious. Moreover, they also cause a number of unique risks for cryptocurrencies.
We should start with ordinary theft. The first example concerns transferring money. When the address of the wallet is copied, the Trojan on the clipboard changes the address to its own, care should be taken to double-check the address after copying but not all people do this. The second one is phishing: a user is trapped into a fake site through deceit where he will download the wallet and enter the password. The difference with the traditional payment system is that in case of cryptocurrencies you can not get this transfer back. What has come into the blockchain remains there.
In addition, even a real payment portal with the correct address can cause loss of money. In June 2017 the most popular web-purse for Ethereum Classic, located at the original address, suddenly started stealing money from users' wallets. The reason for this was the hackers’ use of social engineering methods and the hosting provider’s concern that they are the real owners of the domain. After getting access, such operations began.
As a matter of fact, the previously presented problems are typical for electronic money as a whole. But now it is necessary to note the difficulties peculiar for cryptocurrency only. One of the problems is the loss of money when there is an error in the transferee’s address made. For example, what Ethereum concerns, if the last sign of the address was not copied, the money went to nowhere, or vice versa, the money reached the right place, but all of a sudden the sum transferred turned out to be hundred times more. As for bitcoins, this error is irrelevant, there is a built-in validation of the address, but there you can accidentally send hundreds of bitcoins to whom you don’t know and go bankrupt losing millions of dollars or by chance pay a great commission.
Another typical problem is loss or theft of the purse, which can be stolen from a computer using viruses or lost due to a hard drive failure.
Furthermore, unreliable ICOs is one of the unfavourable factors in the cryptocurrency market. Though in 2017 over 1.5 billion dollars were attracted through the ICOs, there are still few successful projects. The reason for this is that the market of cryptocurrency is not regulated yet, there are no risk assessment mechanisms as such. Consequently, the return on investments is out of the question. It all depends on the project author’s honesty. The author can simply make off with money, because it is quite difficult to de-inanimate the recipient of investment in the cryptomarket.
It is also noteworthy, there is another situation simpler, but not less interesting. As usual, investments in the ICO start to be collected at a definite time and finish when the target amount is gathered. But at the last moment before the beginning a hacker, who has got an access to the site, may interfere. He replaces the right address for investments with his own. When this happens, investors can transfer about ten million US dollars just for an hour. Then the address is marked as forged, but it does not stop the participants, they continue to send their money to the wrong address.
To protect yourself in the cryptocurrency market, you should use a few basic tips:
- Check and double-check the purse address and do not click on suspicious links.
- Recheck the recipient's address, amount and commission.
- Write down a mnemonic phrase, with which you can restore the wallet.
- When investing in different projects, do not be in a hurry and think your actions over.
- Use hardware wallets and antivirus of high quality.