9 minute read
LIFE WITH CRYPTO
Many investors had heard about the cryptocurrency, the ups and downs in the price of Bitcoin, and success stories when several thousand dollars made people millionaires. But in reality, everything is much more complicated. Before investing in a cryptocurrency, you need to understand what it is, the main advantages and disadvantages of an asset, its differences from traditional money, and the main ways of earning.
Unlike an electronic wallet, a cryptocurrency is based on a comp lex cryptographic algorithm. The principle of operation of digital coins lies in an open data transfer protocol. All actions, including issuing new money and processing transactions, are performed collectivel by the participants in the network.
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The level of user confidence determines the value of a cryptocurrency. The more people use it, the higher the cost and demand for new coins.
THE MAIN ADVANTAGES OF CRYPTOCURRENCIES:
Reliability
Encryption algorithms, blockchain, and computing power make it difficult to hack or tamper with money data.
Open-source
It allows anyone to investigate the software, look for bugs, and suggest improvements to the network.
Limitation
The number of coins issued is limited and known in advance. Therefore, only the consent of most users on the network can change it.
CROSS-BORDER PAYMENTS
It is no longer necessary to use banks or expensive intermediaries to transfer money to other countries.
Control over funds
In the event of bankruptcy of a bank, no one guarantees the safety of funds or their return. The holder of the cryptocurrency is personally responsible for the digital money.
Earning Opportunity
The popularity and development of new technology allow for a greater return on investment than traditional tools. Despite many advantages, cryptocurrencies have significant disadvantages:
• The risk of losing all your money. To access the money stored in the wallet, you need to enter the private key. It cannot be restored or changed. In case of loss of login data, the funds will be frozen in the account.
• 51% attack. The security of any cryptocurrency lies in the decentralization of computing power. If one person or a group of people gain access to 51% of the network resources, this will allow any changes to the operation of the blockchain. However, the more computing power a cryptocurrency has, the more difficult it is to implement this plan.
• Exchange rate volatility. User confidence and demand influence the value of digital coins.
Also, the market reacts unpredictably to changes in the policy of leading countries regarding cryptocurrencies.
• No guarantees. All risks fall on the shoulders of investors. You can do nothing in case of loss of money, theft of funds, or lack of access to the wallet.
How To Make Money On Cryptocurrencies
The way to make money on cryptocurrencies depends on personal preferences and startup capital. Some investors use mining, others — longterm storage of assets, and some prefer active trading.
The main options for making money:
Mining is buying equipment and using it to mine new coins. The method will require cheap electricity, technical skills, and significant investments. At the same time, the payback period depends on the rate of the chosen cryptocurrency.
Cloud mining is the rent of computing power from a company that maintains the equipment. The investor chooses only the number of hashes and the cryptocurrency for mining.
Buying on the stock exchange and holding is an investment in popular and promising assets, just like ordinary securities. The profit arises from the price of the coins.
Trading is the conclusion of profitable trade deals on the stock exchange by analyzing the current situation and predicting market movements. Arbitration between exchanges — buying cryptocurrencies on one exchange and selling at a better rate on another. For small amounts, the method does not make sense.
Investment funds are analogous to mutual funds in the cryptocurrency world. They hold stable, moderate, and risky digital assets in their portfolios. Since cryptocurrencies carry risks, it is recommended to combine several methods. Diversification of strategies and the number of assets will help save the funds and increase investment capital.
The market capitalization of cryptocurrencies has reached $ 2.5 trillion. It speaks of the actual value of blockchain and other technologies related to cryptocurrency. However, such capitalization can also be a “bubble of overpricing”. It forced such a financial institution as the International Monetary Fund to inter vene in this growing market. In particular, the IMF warned that cryptocurrencyrelated risks could become systemic and called for global, consistent, and coordinated regulation of the cryptocurrency industry to maintain the stability of the entire global financial system.
High volatility and the risk of a collapse in the value of the cryptocurrency are not the only fears in the Fund. Another problem is weak investor protection, a lack of reserves in some stablecoins, and a lack of accurate and understandable information.
Despite all these risks, some markets and countries rush to use cryptocurrencies to avoid currency restrictions. The IMF offers several general rules for regulating cryptocurrencies.
Service providers who store or transmit cryptocurrency must be licensed. Licenses must meet the requirements for financial service providers today.
Cryptocurrency transactions should be governed by rules modeled on existing approaches. Consequently, cryptocurrency investments must be regulated in the same way as securities and by the same authorities. Payment services and products must comply with requirements similar to those of the banking industry, which the central bank controls.
In banking, securities, insurance, and pensions, regulators should set liquidity requirements for cryptocurrencies and require risk assessments.
Earlier, the Joe Biden administration came up with a proposal to regulate stablecoins the same way as the banking industry. It will empower banking regulators to oversee the industry. According to a report by the Financial Services Committee of the US House of Representatives, the market capitalization of stablecoins reached almost $ 147 billion as of November. American officials fear that the massive use of stablecoins could threaten the economy, considering their growth rate. Bitcoin’s rapidly growing influence is also spurring markets for other cryptocurrencies, forcing governments to apply containment and restraint measures to avoid chaotic growth and threaten the entire global monetary system and financial stability. So, recently Germany, Italy and France announced that they plan to ban the Libra cryptocurrency throughout Europe. The G7 members argue that such digital currencies should not be launched until serious international risks are eliminated. David Markus, who leads the Libra project for Facebook, said that the group’s primary goal remains to create a more efficient payment system. Still, the company is open to looking for alternatives. In mid-October, eBay, Visa, Mastercard, and Stripe announced that they would no longer participate in Facebook’s Libra cryptocurrency project. Other contributors who left the Libra support team are Booking Holdings and PayPal. Libra’s initial backers, Uber and Lyft, told CNBC that their involvement with the project has not changed.
The crypto attracts the most talented but also crooks and scammers.
One of the main features of Bitcoin is that each cryptocurrency holder is responsible for their finances. If you lose your bitcoins by sending them to someone by mistake, or if they will be stolen, you will not be able to get them back — the funds will be lost forever. That is why Bitcoin has become a haven for various scammers. Cybercriminals are becoming more skillful and are finding more and more ways and solutions to steal honestly earned bitcoins right from under your nose. Those who have been using cryptocurrencies for more than a year, as a rule, rarely become victims of scammers. Their goal is new users who are easily fooled into promising rapid capital gains in a short time frame.
Ransomware
One of the most popular and lucrative scams is using a malicious ransomware hacker program. Ransomware is essentially a virus that encrypts some or all of the files on your computer. The program then prompts the PC owner to pay a ransom, after which the files will supposedly be decrypted. Typically, the victims of these attacks are companies or organizations that cannot afford to be out of work for a long time. In most cases, files encrypted by such programs cannot be decrypted on their own. To avoid falling victim to ransomware, remember to back up essential files, and do not open or download suspicious files to your computer. Also, do not skimp on highquality antivirus software — it can save you a lot of nerves.
Fake Wallets
Fake wallets are websites or mobile apps that look just like a real wallet (until they have a chance to steal your coins). Typically, these wallets use the logos and names of existing wallets to trick users. Some fake wallets have even appeared in the App Store after successfully passing its verification process. Due to such fraud, both genuine wallets, whose name turns out to be slandered as a result of fraud, suffer and Bitcoin itself. To protect yourself from this type of fraud, download wallets only from reliable sources, such as the official website, and carefully check the applications you install from the App Store or Play Market. If an application raises serious doubts, it’s not a sin to seek advice from community members, for example, on Reddit or Bitcointalk.
Phishing
Phishing is a widespread method of stealing information based on social engineering. The most common uses for this are email and fake websites. Fraudsters try to force the victim to share information about their bitcoins with them, for example, asking them to provide a username and password to an online wallet. Often, such requests come in emails that look like an official letter or with domain names that are very similar to the address of this site.
Financial Pyramids
Under this scheme, people are invited to invest their funds and invite their acquaintances for the same purpose. New investments will fulfill obligations on previous investments — this continues until the “bubble” bursts and all remaining depositors lose their money. Pyramid schemes exist in different variations, but they have one thing in common — they want to get your coins and promise big and quick profits. To avoid becoming a victim of a cryptocurrency pyramid, you need to stay away from sites that offer unrealistic profits after investing funds like 1% per day, 100% per month, etc. Also, avoid any company that doesn’t explain precisely how they make a profit.
Fake Cryptocurrencies
One of the most famous examples of this kind of scam is Onecoin. Users thought they were buying a real and successful cryptocurrency, but no such blockchain or Onecoin miners network existed. Under such schemes, coins are often sold under the guise of various educational services or dubious offers — for example, splitting your coins to double them. If you are looking for a cryptocurrency for investment, choose it wisely and do not trust the words of the “developers” who promise that the coin price will increase several times soon. Before buying any cryptocurrency, check if it exists on sites like CryptoCompare or Coinmarketcap.
Fraudulent Icos
ICO or token presale is a type of fundraising that has become very popular in the cryptocurrency community lately. The project team launches an ICO to sell the coins they have issued, accepting bitcoins or other popular cryptocurrencies as payment. Even though ICOs have already helped more than one actual project to raise millions of dollars in a matter of hours, you should be careful about such fundraising scammers are not asleep. A fraudulent ICO recently raised about $ 10 million. Carefully check the information on the project website and search the Internet for information about the company’s owners — often, even such a simple check will help avoid mistakes.
Fraud On P2p Exchanges
This type of scam thrives on peertopeer exchanges like LocalBitcoins or Paxful. These P2P exchanges allow users to trade coins among themselves using an external payment system such as PayPal or bank cards. Unlike Bitcoin, these payment methods will enable you to dispute a transaction made for various reasons. Scammers usually use these exchanges to rob a compromised PayPal account or bank card. To avoid being scammed on P2P exchanges, only sell your bitcoins to registered merchants and try not to use payment methods that can dispute the transaction — PayPal and Skrill. Remember, only whoever controls their private keys controls their bitcoins.
The amounts in cryptocurrency crime reports have recently stepped over the numbers with seven zeros. All over the world, the news is spreading about the next theft or hacking of electronic wallets, not only of private investors but also of the significant cryptocurrency exchanges. For example, Singaporebased cryptocurrency exchange AscendEX recently reported hacking of hot wallets Ethereum, Polygon, and Binance Smart Chain (BSC). PeckShield noted that hackers withdrew $ 77.7 million from the bitcoin exchange. According to analysts, attackers stole $ 8.5 million in Polygon network tokens, $ 9.2 million BSC, $ 60 million Ethereum.
Earlier, hackers withdrew more than $ 150 million from the hot wallets Ethereum and BSC of the BitMart cryptocurrency exchange registered in the Cayman Islands. Gala (GALA), The Sandbox (SAND), Decentraland (MANA), Shiba Inu (SHIB) tokens, as well as $ 500,000 in USD Coin (USDC) stablecoin were withdrawn from Bira’s wallets. According to the founder and CEO of the exchange, Sheldon Xia, the hack occurred due to the theft of a private key. It helped to compromise two hot wallets were compromised. According to Atlas VPN analysts, hacker attacks related to blockchain and cryptocurrencies brought cybercriminals $ 3.8 billion in the past year.
You can protect yourself from hacker attacks and a significant loss of accumulated assets if you pay more attention to the choice of cryptocurrency platforms. Come up with more complex passwords for digital wallets and constantly monitor what methods attackers come up with to steal your money.