Bitcoin is an extremely secure payment option. As you probably already know, bitcoin’s foundation is blockchain technology. The blockchain connects each block of transactions to the next one through cryptography. The transaction content in each block becomes impossible to reverse or change.
Public blockchains are also peer-to-peer, making them difficult to hack since fraudsters would need to hack into all the devices in the network. For these reasons, many feel safer using bitcoin and blockchain technology instead of their credit or bank cards for buying a product.
However, because bitcoin operates on a peer-to-peer currency, it is the user’s responsibility to store and buy their digital currencies securely. Some tips on general storage, along with the use of a bitcoin escrow service, can help protect your interests as a buyer.
Before buying a product
Before buying a product with bitcoin, a user must first have bitcoin to buy products with. Users can attain bitcoin through a peer-to-peer network or a bitcoin ATM. But, the most common is through the use of a cryptocurrency exchange. Once a user finds a trustworthy exchange, they will need to set up an account with a username and password.
Following standard online safety practices, users should avoid sharing their passwords with anyone or posting any personal details online. Sharing your email address, home address, or phone number may help hackers break into your online account.
The difference between safety on a standard eCommerce platform and a cryptocurrency exchange is that the exchange will deposit the purchased coins into a digital wallet.
Along with the wallet is a public and private key. Buyers can use their public address to access their wallets and send and receive cryptocurrency. The private key is what gives you control of the purchased cryptocurrency. However, for users who are storing their assets on the web wallet they purchased their cryptocurrency on, the concept of a private key is not important.
The cryptocurrency exchange will continue to maintain ownership over the keys. A third party storing your assets may sound risky, and it can be, which is why consumers might want to consider all the storage methods available to them.
When storing bitcoin, users are encouraged to use two kinds of wallets, a hot wallet and a cold wallet. A hot wallet is an online wallet. Buyers typically use this wallet for spending. Users can liken the comparison to a physical wallet that may carry a small cash balance for making immediate purchases. However, a user should store the majority of their wealth in a more secure location.
During product purchases
Users are encouraged to purchase from a trusted website. These may include well-known service providers like Microsoft or Overstock or reviewing customer experiences on a platform like Trustpilot.
Users may also look for standard security features such as a lock icon in front of the website URL or the presence of “HTTPS” protocols. Purchasing a product online is not the only way to conduct a bitcoin transaction. Buyers may also locate a Seller on a bitcoin marketplace and decide to make the transaction directly.
In this case, Buyers are encouraged to sign up for an online escrow service such as CryptoExchange. Escrow service providers offer additional security by acting as the intermediary between the Buyer and the Seller. The Buyer will transfer money to the escrow account with an escrow service to safely hold the funds. The Buyer and Seller will proceed through the agreed-upon terms of the agreement.
Once the Buyer receives the product and has determined that it is in good condition, the escrow account can release funds back to the Seller’s wallet. Since cryptocurrency is non-reversible, the added level of security can give Buyers and Sellers peace of mind while conducting large transactions with bitcoin.
After buying a product
Buyers that don’t use all their cryptocurrency should store the remainder in a hard wallet for safekeeping. While online exchanges have improved their security standards, some of the exchanges may still fall into bankruptcy. When cryptocurrency exchanges go bankrupt, user’s assets are often lost.
Users that store their currencies in a hard wallet can rest assured that their assets are held in safekeeping until they are ready to make another purchase. Users can transfer their digital currencies from their offline wallet back into an online wallet and repeat the buying process.
Implementing these fundamental safety strategies is crucial to preserving your online security. As bitcoin continues to increase in price, there will be new opportunities for hackers to look for mistakes to take advantage of.