The following is a guest contributed post from Josh Ong, Director of Global Marketing & Communications at Cheetah Mobile.
Cryptocurrency is having something of a moment, and not just financially. Even as the value of Bitcoin becomes ever more volatile, and other currencies like Ripple struggle to gain a foothold, cryptocurrency has still managed to captivate public curiosity and attract staggering amounts of investment. It’s even become part of pop culture: Companies like KFC now allow people to pay for their fried chicken using bitcoin, albeit only in Canada, and there is even a J-pop group called Kasotsuka Shojo (the Virtual Currency Girls) where each of the 8 members represents a different cryptocurrency, denoted by a special mask.
In the past several years, cryptocurrencies have experienced a remarkable shift in popularity; Bitcoin in particular started out as a shadowy currency of the internet underworld only to become the darling of the investment bank set (although it is still the currency of choice for black market deals).
While there’s plenty to be positive about in this new world of cryptocurrency, that’s not to say there aren’t major concerns as well. In particular, there have been a number of security incidents of late to pay attention to. In August 2016, roughly 120,000 bitcoins valued at $72 million were stolen from Hong Kong’s Bitfinex exchange. Lest you think vulnerabilities to cryptocurrency are over and done with, recently it was uncovered that Electrum bitcoin wallets were left vulnerable to hackers for a two-year period. The vulnerability allowed any website, not to mention anyone covertly hacking any website, to steal bitcoin managed with Electrum. This bug was exploitable from February 2016 all the way to January 2018. In another recent security scare, 150,000 ethers worth $30 million have been reported as stolen due to a breach in Parity’s wallet software.
When these security breaches occur, real people suffer real losses. South Korean exchange Yapizon, for example, recently suffered a $5 million loss. The exchange’s solution how to deal with this turn of events was to punish all of its users. In a post, they wrote:
“After many discussions, legal and accounting consultations and reviews, We have come to the conclusion that it should be applied fairly to all members. It is also the most common way to go through the liquidation process. The loss of 37.08% will have the same effect on all members’ assets.”
Incidents such as the ones involving Bitfinex and Yapizon are what make people reluctant to put their trust in Bitcoin or other technologies that rely on blockchain to carry out transactions. That being said, there are tools out there that can help users keep their transactions secure and their information safe.
For all cryptocurrency transactions that involve blockchain, there needs to be some sort of reference point for the transaction. This reference point is also known as a private key, which is required for carrying out all actions regarding bitcoin, be it buying, selling, or trading. The security of your private key represents the security of your assets on the blockchain, so it’s important to make sure that it’s kept in a place that only you have access to – such as a blockchain wallet. A blockchain wallet functions, at the most basic level, as a way to secure your private key. More sophisticated mobile wallets might allow you to manage transactions directly from your mobile phone, and function as a record of those transactions.
While not exactly a failsafe option, mobile apps and digital wallets are able to employ security and protection measures in order to prevent private keys being stolen while in use. For example, apps might have secure keyboards can help prevent passwords from being leaked, or symmetrically encrypt private keys to ensure that they’re not stored in one place, thus minimizing the impact should a hack occur.
Cryptocurrencies on the rise
As more cryptocurrencies hit the market – from Ethereum to Ripple to Zcash to Dash to Kodakoin (“a photocentric cryptocurrency to empower photographers and agencies to take greater control in image rights management”), it will become even more important for people to be aware of the security risks inherent in blockchain technologies, as well as the ways of mitigating them. The cryptocurrency mania is likely to remain strong for a while, especially in light of the new partnership between MoneyGram and Ripple and the various blockchain initiatives cropping up in myriad industries.
The future of cryptocurrencies is undeniably hard to predict. Only two things are certain: one, it is a critical technology to pay attention to, and two, it will certainly be an entertaining ride.