Several users are already hailing cryptocurrencies as one of the safest among existing modes of monetary transactions done through financial institutions and the banking sector. Best of all, cryptocurrency transactions are not only kept in a public but distributed ledger that’s much more transparent and thus, difficult to meddle with.
However, like every coin has two faces and every pro has its own con, the same way Crypto transactions also have some security flaws. So, let’s understand how reliable Bitcoin transactions are, and the threats that endanger its security.
Mode of Bitcoin Transactions
Well, Bitcoin is known for keeping its financial transactions on a ledger and the database is enormous which has details of the transactions like date, amount, and other required information. With the help of this information, banks can figure out the money you have in your accounts. However, the cryptocurrency and Bitcoin are working on the distributed ledger wherein the banking sector is using the centralized ledger for the recording the transactions. As compared to the centralized ledger, the distributed ledger is protected and reliable ledge. For the centralized ledger, only one organization has the entire power of managing the transactions and the people those are not from the same organization will not be able to make any amendments to the available contents.
The cryptocurrency and blockchain work on distributed ledgers that is decentralized. Well, no one has the power to control it, but it is extremely tamper-proof. However, the ledge might create replica files across some nodes and machines in the network system which is sustained in sync. But for the Bitcoin, it has over ten thousand nodes and every node have the following (monitoring) ledger of Bitcoin transactions.
If the chances of meddling with your transactions of Bitcoin with solitary nodes, then the remaining nodes in the network won’t accept the new amendments such as by enhancing its value.
Threats of Bitcoin’s Transaction:
Like everything else, wallets also have their own security issues and threats when you keep your digital currency in the wallets. There are two types of threats: hot wallets threats and private keys threats.
Hot Wallets Threats:
There are two types of Wallets, cold wallets and hot wallets. Bitcoin cold wallets are mostly for the offline storage wherein hot wallets are associated with the accessible online and web. For instance, you’re a hot wallet user then any of the app errors or exchanges that hosts your wallet will make you unprotected. In case, the host of the wallet has been attacked and hacked by the cyber-attacks then you can be drained completely with your crypto coin without having an option to get it back. This can be performed by the hackers just by unchecking the Bitcoin transactions on your behalf. Please keep in mind, there is no way which can help you to find out about the suspicious activity on your account neither by centralized organization nor by the banks.
Private Keys Threats:
There are two kinds of bitcoin keys, private and public. A private key is sort of personal key which validates the transactions performed by you to others for sending money wherein a public key is key of a digital address and helps users at the time of making money related transactions. The private key is an essential key that helps you to control your Bitcoin transactions. In case, you lose your private key, you will automatically lose the power of your cryptocurrency transactions as well as the knowledge of your previous transactions.
Smart Contracts Threats:
As smart contracts aren’t available in Bitcoin, but it is important to understand because it is available in the Ethereum which is considered as the second largest blockchain across the globe. Smart contracts offer the additional capabilities and functionality to the blockchain by providing the facility to transfer assets to each other without needing any middleman. However, if the user doesn’t have the required wisdom about the smart contacts then he/she is prone to human error.
The Bottom Line:
Bitcoins transaction are reliable as the blockchain distributed ledger which is decentralized but makes sure you don’t take all the crypto’s immutable. Moreover, if you’re following the essential blockchain security principles, then you don’t need to worry about the Bitcoin transactions. However, you need to ensure that you never store the money in the hot wallet and never ever share your private keys with anybody.