Even people who aren’t familiar with investing have heard of cryptocurrency — especially lately since it has frequently made headlines.
Some of those news stories about digital currencies focus on the rapid rises — and seemingly inevitable declines — of Bitcoin, one of the most well-known cryptocurrencies.
Others discuss how people had relatively stable lifestyles but lost most of what they had after becoming interested and investing in cryptocurrency. Some people who have had substantial successes in cryptocurrency realm live in anonymity, not wanting to attract too much attention.
These potential downsides and others have some people wondering if the potential to get rich as a cryptocurrency investor is appealing enough to make the less-profitable outcomes less frightening. Indeed, when things go wrong, security is often the first thing people lose.
Cryptocurrencies Becoming More Attractive to Hackers
Cryptocurrency investors keep their virtual funds in digital wallets. Pickpockets have swiped physical currencies for generations, and the same is true for cryptocurrencies. Increasing interest levels makes them more tempting to hackers. In January 2018, hackers stole more than half a billion dollars worth of digital currency from Coincheck, a Japanese exchange.
Analysts say investors should expect more attacks of the same kind. Sometimes, the hacks occur on investors’ computers through a process called cryptojacking, which involves taking control of a victim’s browser and using it to create or “mine” cryptocurrencies fraudulently.
According to research collected by Check Point, a cybersecurity company, mining malware has affected 55 percent of organizations worldwide. Statistics from December 2017 indicate the most widely used threat of this kind is called Coinhive.
Cybercriminals depend on botnets, too, which are groups of internet-connected devices infected by a common type of malware. Botnets were once not considered financially viable, but experts say newer cryptocurrencies are easier to mine, and people can rent botnets for as little as $40.
The growing likelihood of getting hacked is one of the many reasons people prefer investing in traditional physical currencies, such as silver. Compared to cryptocurrencies, statistics show silver is historically stable. Even after experiencing downturns, it often makes a complete rebound in 12 to 15 months.
People Are Losing Access to Their Digital Wallets
The stress of losing an actual wallet is severe enough, but for individuals who cannot gain access to their digital wallets after forgetting the password or deleting a file that contains cryptocurrency information, the anxiety can be even worse.
Mark Frauenfelder, an investor who lost $30,000 of cryptocurrency after forgetting a PIN, knows that reality all too well. He eventually recovered it, but not without going through months of anguish and failed efforts.
A software architect using the alias Dave Bitcoin launched a website called Wallet Recovery Services to help people in Frauenfelder’s predicament. Dave relies on a computer program to try millions of passwords in a short timeframe — otherwise known as brute force decryption. He has about a 30 percent success rate and charges individuals 20 percent of whatever is in the recovered wallets.
Dave reports his business has boomed, due in large part to the rising popularity of cryptocurrencies. Even as currencies evolve, the fact that humans forget things remains constant.
Cryptocurrency Wealth and Its Connection to Personal Safety
As mentioned earlier, people who have reaped the rewards of cryptocurrency in significant ways typically stay tight-lipped. Sometimes, they don’t disclose the kinds of digital currency they own — their closest friends and relatives may not know how much they possess. Fellow investors who want to have the same victories could hound those who divulge more details, too.
The primary reason investors stay quiet about their cryptocurrency holdings is that they fear getting robbed or otherwise targeted. The decentralized nature of cryptocurrencies is appealing to many people, but it also means they can’t put their wealth in banks to reduce the personal safety risk.
Cybercriminals have also tried to tap into investors’ paranoia for gain by using an online death threat scam. It tells victims’ their lives are in danger unless they pay a specific amount of cryptocurrency.
Evaluating the Plausibility of Disaster
At the beginning of the year, the Utah Division of Securities warned that cryptocurrency dealings could become risky for several reasons, including evidence of digital money used for fraud. With all these factors in mind, potential investors must take stock of the circumstances surrounding their situations and determine those most likely to cause threats to security.
Then, it’s crucial for them to take action to minimize the likelihood of something devastating happening. That may mean going to great lengths to prevent losing a digital wallet access code, investing in a home monitoring system or beefing up malware protection on their computers.
The inherent uncertainty of cryptocurrency investing is even higher for individuals who do not assess possible threats and decide how they can reduce them.
After all, if cryptocurrencies continue to flourish, the efforts to scam people and steal their wealth will increase, too.