When someone at the party turns to the topic of Bitcoin, do you panic? You’re not alone. The ins and outs of cryptocurrency are confusing to say the least. In simple terms, this digital asset utilizes computer code and blockchain technology to operate without the need for a central party, whether that be a person, company, government, or bank. Bitcoin, the first cryptocurrency created, was at first developed to act as a payment tool solely for the online universe. It has evolved from a hobby among coders to a mainstream exchange on Wall Street. There are risks, however, with getting involved with cryptocurrency and financial systems that aren’t regulated by the government. Liran Ma, professor in the department of computer science at TCU, clears up some of the confusion surrounding cryptocurrency, including complications related to cybersecurity.
What’s the difference between cryptocurrency and a blockchain?
Blockchain is the technology that underpins cryptocurrency (among other things such as supply chain and logistics monitoring). A blockchain is a decentralized ledger, similar to a database, but it isn’t controlled by a central authority. Data (transactions) are added and updated via consensus of the different nodes running the software in the network.
Is blockchain technology secure?
A key design principle of blockchain is to let people (particularly people who do not trust one another) share data in a secure and tamperproof way. Subsequently, blockchains store data using sophisticated math and innovative rules that are extremely difficult for attackers to manipulate. By design, blockchain guarantees the fidelity and security of a record of data and generates trust without the need for a trusted third party. However, this does not mean that blockchain is not vulnerable to cyberattacks and security fraud.
What are the most common cybersecurity risks?
The security of even the best-designed blockchain systems can fail in places where the rigorous math and fancy rules come into contact with incompetent end users. Most blockchain transactions have endpoints that are far less secure. For example, the result of Bitcoin trading or investment may be a large sum of bitcoin being deposited into a “hot wallet” or virtual savings account. These wallet accounts may not be as hacker-proof as the actual blocks within the blockchain.
Digital currency is accessed via a private “key.” How could that make account security problematic?
Asymmetric cryptography (public and private key pairs) is at the core of blockchain technology. Therefore, improper handling of a private key can cause some serious security issues. For example: storing it in infected computers, unprotected notes, leaking by baiting techniques such as phishing attacks. Having control of your private key basically means owning all the data associated with you in a blockchain. In the case of cryptocurrency, owning all your coins.
Some suggest keeping cryptocurrency coins offline in cold storage. What are the benefits of that?
Cold storage (or offline wallets) is one of the safest methods for holding bitcoin, as these wallets are not accessible via the internet. Keeping bitcoins offline substantially reduces the threat from hackers. There is no need to worry about a hacker gaining digital access to a wallet when the wallet itself is not online.
What do you predict will happen with cryptocurrency in the coming year?
In 2021 there’s tremendous attention being paid to cryptocurrency because Bitcoin hit multiple new all-time high prices. It’s difficult to predict where things are headed long-term, but in the coming year it is possible that there will be more stringent regulations on cryptocurrency. One day it is even possible that cryptocurrency could be banned by the developed nations and become worthless. On a positive side, more mainstream companies across industries may adopt and invest in cryptocurrency in the coming year.
Five Cryptocurrency Slang Terms You Should Know
- Pump & Dump
A pump and dump occurs when a group of investors hold a substantial percentage of a coin’s available supply at a low price point. They facilitate hype based for the majority on false statements, which creates demand within the market, and drives the price up.
- Bag Holder
These investors were either unaware of their position’s drop in value or were set on waiting to sell at a higher price. They end up being the last holders of a failing investment, and therefore become bag holders.
Within the crypto community the term “mooning” is used in reference to a coin’s price experiencing a spike or significant increase. People have started saying things like “we’re going to the moon” or “get on this moon rocket” as a sort of slogan.
- Diamond Hands
The term “diamond hands” refers to investors who are not deterred by swings in price or signs of trouble for their investment. These traders will hold until the bitter end because they strongly believe that their investment will always rebound.
- Satoshi (SAT)
A Satoshi is the smallest defined unit of bitcoin cryptocurrency, 0.00000001. The term isnamed after Satoshi Nakamoto, the creator of Bitcoin.
Learn more about TCU’s department of computer science.