With expectations running high about cryptocurrency becoming the mainstream currency. Decentralization and security are the primary reasons for cryptocurrencies to gain traction in the digital world. It is important to stay updated with information on cryptocurrency security if you are going ahead with trading plans. While crypto coins promise high returns, they are equally susceptible to cyber-attacks.
Cryptocurrency has made big news in recent times, because of the looming threats of hacks and cyber-attacks. Cybercriminals use sophisticated techniques to steal crypto assets. So, while building a cryptosystem, special attention is given to security at all layers of the technology stack. You can initiate your trading at CoinSwitch as it features excellent security measures and supports numerous assets as it is well known as the most trusted cryptocurrency exchange in India. Here we are sharing the three layers of cryptocurrency security which can guide you in understanding more about the crypto world as well as help you in investing and trading digital currencies in a better way.
First Layer: Protocol – A protocol is basically essentially a foundational layer of code that tells something how to function. It establishes the structure of the blockchain by enabling digital money to be securely exchanged on the internet. Protocols set a particular structure and establish safeguards to prevent malicious users from causing damage. A loophole in the protocol’s user interface can be an entry point for attackers. The technology uses a decentralized network so as to make sure that participants have no trust issues or use authority over each other. Therefore, there is no central point of control in a decentralized cryptocurrency network.
Bitcoin, Ethereum, and Litecoin make use of public blockchain so it is mandatory to follow the security protocols. The two kinds of currency used in the first layer are coins and tokens. Those who opt to become investors will exchange money for the cryptocurrency project’s coin or token. Cryptocurrency tokens are fungible digital assets that can be used as mediums of exchange within the cryptosystem. Coins are meant to be used directly for transactions, just like how money is used. The most important thing to be noted here is that if the first security layer is facing an issue, then the subsequent two layers face equal threats and they cannot help in any way.
Second Layer: Exchanges – With cryptocurrency occupying some portion of investor portfolios, crypto exchanges are becoming more and more active. If you’re looking to buy or sell cryptocurrencies, you will need to use a cryptocurrency exchange. They keep your coins secure and help you to accomplish your trading goals. The authorization code of these exchanges is kept as unique and random as possible. One among the highly secure and immutable cryptocurrencies is Ethereum and 1 Ethereum to INR value is 3,11,233 as of December 6, 2021.
Centralized exchanges continue the process of setting up and maintaining infrastructure to offer secured services. Decentralized exchanges aim to tackle the issues that hinder centralized networks by building peer-to-peer marketplaces. Decentralized Exchanges have an automated process that controls all the transactions without any regulations from the authorities. Users of decentralized exchanges have a lesser risk of being hacked as they need not transfer their assets to a third party. As people find cryptocurrency trading as a lucrative investment option, many new startup exchanges have come up. But their focus is not much on the security perspective so they may end up with severe security breaches. If you are going ahead with investment plans with cryptocurrency, it is important that you carefully choose an exchange that goes out of its way to protect your investments.
Third layer: Wallets – One thing all investors should know about is cryptocurrency wallets, which add a layer of safety to your A cryptocurrency wallet is a storage method for holding cryptocurrency. Just like how you keep your wallet safe, it is important that you keep your wallet in the crypto world safe too. The password that gives access to your cryptocurrency is termed a private key and they are securely stored inside your wallet. These digital wallets are classified into two categories – hot and cold wallets. Hot wallets are wallets that are made available online whereas cold wallets are those like bank vaults, stored offline. The best practice is to invest in a cold wallet as it keeps your digital currency away from the access of hackers.
Users can view or access cryptocurrency wallets easily from a computer or smartphone. You can choose the level of security that you desire, with crypto the choice is yours. With cyber-attacks happening every day, it’s imperative you know your options to prevent something similar from happening to you. Regardless of where you opt to store your cryptocurrency, remember bad actors within the space.
The whole idea behind each of these layers is to create a network with impenetrable security over a broadly decentralized network. Now that you have in-depth knowledge about the various levels of cryptocurrency security, you can trade cryptos, stress-free.