Being a web designer, I am always faced with the dilemma of how do I keep my clients data safe from malicious people. I try to educate them about not opening up suspicious links to emails and websites but of course this got me to thinking about just how safe our information is in the crypto world. Turns out: its through cryptography.
It works something like this: Each user has special codes embedded in the transaction which stops their information from being assessed by others. This is called cryptography and its nearly impossible to to hack. It’s also where the crypto part of the definition comes from. Crypto means hidden, so the information is hidden.
I’m not going to go into a long explanation of this ( I will put a video below that explains this in detail) but its pretty much like the process of sending an encrypted message to a business associate or your friend. If they have the same email program you have, you can just encrypt the email before you send it which basically scrambles the words and send it out so that it’s safe from malicious people until it gets to you safe and unaltered in any way. That’s pretty cool.
When you making money transactions on the internet the last thing you want to think about is if the wrong person is going to intercept the transaction. I know that cryptocurrency is still going through it’s growing stages but I feel much more confident knowing that developers are thinking hard about security and encryption.
Although I wanted to jump right into investing and watching my money just roll in, the logical part of my brain knew that I needed to understand fully what Blockchain was and how it played into the big picture. I started watching a video and I fould a site that explains what Blockchain is in plain English.
What It Is
Blockchain is a public record of transactions. It’s also distributed, so instead of one person controlling everything, there are thousands of computers around the world connected to a network, and these thousands of computers together come to an agreement on which transactions are valid.
Whenever someone makes a transaction, it is broadcasted to the network, and the computers run complex algorithms to determine if the transaction is valid. If it is, they add it to the record of transactions, linking it to the previous transaction. This chain of linked transactions is known as the blockchain. Since the transactions all reference the one before them, you can figure out which ones came first, thus ordering them. Full article here. Ok, since I have some IT experience and understand networks, this made sense to me. I guess the next question was…How is the Blockchain secured? I will cover this in my next post on mining and tokens.
I was at a crypto conference a few months ago and I won a crypto wallet of my very own. Wow! I thought, this will be a great way to get my feet wet and make my first trade. I quickly realized that I had NO idea what to do with this thing.
Ok, before I went any further I had to go backwards…again. I did some research on the wallet and realized that it’s a cold-storage wallet. What is that you might ask? Well it means that I can store my bitcoin or altcoins offline to keep them safe from the internet. The wallet stores the private keys of the bitcoin owner which they need if they are going to make any transactions. I have read that you should never keep large amounts of coins on your account in any any exchange in case the site gets hacked. Cold storage resolves this issue by signing the transaction with the private key in an offline environment. Because the private key does not come into contact with a server during the transaction signing process and is done offline, the risk of hacking goes down substantially.
There are other types of wallets that you can use, each with different risks:
I also read that there are some risks with cold storage wallets as well, but it does seem to be the best option for the person looking to hold on to their coins for a while and feel a sense of protection while through the learning process. My wallet says that it’s fire and flood resistance so that makes me feel better as well. I think I’m now ready to take the plunge to make my first trade.
As much as I want to jump right into Bitcoin trading, I know that I must do my due diligence so that I don’t get scammed as a newbie.
Since there is so much news about crytocurrency scams these days, I wanted to know what to look out for, and after a little digging I came across some very good tips.
I won a new crypto wallet last year at a conference and I already knew that the issuing company was reputable but I found out later on that you really do have to do your research to make sure your dealing with good companies right from the start. Check out reviews and talk to others that have dealt with that company directly. As far as exchanges, make sure that you are checking prices and also make sure the site starts with HTTPS which is a sign that the traffic is encrypted. If it sounds too good to be true (and promises the world) – it probably is.
Of course we all know about fake websites that bait and switch visitors but what I didn’t know was that this tactic is being used in the crypto space via social media (See video below). ICO’s – Don’t deposit your coins ANYWHERE until you fully vet the ICO that your thinking of investing with. READ the white paper carefully.
It’s interesting that I was looking into mining just a few weeks ago. Turns out this is also an area where you really have do your homework and be realistic about returns on investment since they will probably go down a little over time and you have to be wary of sites that promise you otherwise.
I’ve ultimately decided that I’m going to read a few crypto articles everyday along with my favorite blogs so that I can start to spot things that would stand out as a red flag right away. I also read Investopedia for all things financial. They have some great articles on crypto as well.
Last weekend I went to a crypto meetup where the topic was atomic swaps. Of course I had no idea what this was so I was totally intrigued.
Atomic swaps are basically a way for 2 parties to swap different cryptocurrencies on their own without the need for an exchange which we all know can come with high fees and wait times. The “swap” on the other hand can be done without the need of an exchange or miners being involved. This kind of swap also has no to low transaction fees and can be done on or off the blockchain. The basic idea is sort of like a 3-way handshake between both parties that want to set up a transaction between themselves. Once they decide what they want to trade, they set up a contract that cannot be broken and only completes when both parties get what they agreed to.
Right now the only catch of these transactions are that:
Both currencies support HTLC
Both have the same hashing algorithm
This transaction is possible through a process called Hashed Timelock Contracts(HTLCs). Both parties agree to predetermined contract that is set up for them to verify the transaction and trade their coins through a secret channel that only they have access to. A more detailed explanation can be found at Blockgeeks website.
I thought this was pretty cool because this a great way to get something that you want without going through a lot of hassle and paying a lot of money in fees. The technology is still fairly new but there have been successful swaps and I’m definitely looking forward to more news on swaps in the coming year.