Over the past few years, cryptocurrencies like Bitcoin have rapidly gained in popularity. Banks, universities, financial giants, and even governments are now dealing in cryptocurrencies. This is probably because of the host of benefits that they offer over conventional currencies and other payment methods.
Benefits of cryptocurrency payments
Quick: an overwhelming advantage of using cryptocurrencies is the sheer speed of transactions. Cryptocurrency transactions take place almost immediately – and they cost little to nothing. This is why many companies are abandoning conventional payment methods for cryptocurrency-based solutions.
Transparency: another notable feature of cryptocurrency payments is their transparency. Anyone can check out any cryptocurrency transaction using any online device. All transactions are public.
Anonymity: although cryptocurrency transactions are transparent, the individuals or entities behind these transactions can stay fully anonymous (if users are smart about it). Governments around the world may not like it but many open-source enthusiasts deeply appreciate the privacy afforded by this anonymity.
Ease of transaction: in a cryptocurrency transaction, the sender or the receiver doesn’t need to have a bank account, go to a vendor, or provide identification details anywhere. You simply create an online wallet and start receiving or sending payments across the globe.
The sheer ease of cryptocurrency payments makes it a preferred method for most new startups, keeping the costs low and the process hassle-free.
How do cryptocurrency payments work?
Typically, you register at an online cryptocurrency exchange. After registration, you are provided with a wallet in which you can store and receive coins. Alternatively, you can also use a computer-based wallet which lets you hold your coins offline.
A wallet comes with a public key and a private key. The private key allows you to access the wallet, kind of like your password or login security. The public key lets others send you coins (it changes with each transaction).
When you want someone to send you coins, you simply share your public key with them. Using this key, the sender can immediately and directly send the cryptocurrency payment to your wallet.
Similarly, if you want to send coins to another person, you simply look up the public key of the receiver. Many businesses share their public cryptocurrency keys in the form of QR codes. Once you scan the code, the software recognizes the relevant account. You can then send a payment or a payment request.
The process is incredibly simple and takes little time.
Security issues with cryptocurrency payments
Despite the extraordinary benefits of using cryptocurrency payments, this method comes with its security hazards.
Typically, you register on an online exchange to send or receive coins. In order to purchase coins, you are required to provide credit card information or bank details. While these details are not shared with other users, a hacker can steal the information or it can be subpoenaed. This has happened before and is fairly common in the cryptocurrency world.
It’s also possible to trace transactions on the P2P network, albeit this requires controlling enough nodes. This is one of the reasons people may want to use a VPN when making sensitive payments.
The other issue is there’s typically no recourse if you want to get a refund and you’ve paid in crypto.
How to better secure cryptocurrency payments?
Hot and cold wallets
A hot wallet is one that is connected to an exchange or is otherwise online. Such a wallet is more prone to network-based attacks from hackers. A cold wallet is an offline wallet and is relatively more secure in comparison.
You can use a combination of the two to improve the security of your cryptocurrency transactions. Ideally, you should keep the bulk of your coins in a cold, offline wallet. Use the hot wallet to store only the amount that you need to use on a daily basis. Even if your hot wallet is compromised in a network attack, you only lose a small portion of the coins.
Offline private keys
Your private key provides you access to your cryptocurrency wallet. In many cases, the private key is stored online or on the network where the wallet is hosted. This means that if the network is compromised, the hacker can access your private key as well. Once he has the private key, he also gains access to the wallet.
To prevent this, use offline storage for your private key. Ideally, store the key in a computer that is not connected to the internet. This effectively prevents any hacker from laying hands on your private key.
However, this comes with some hassle. Every time you need to complete a cryptocurrency transaction, you are required to carry the transaction over a USB. The USB is then connected to the offline computer where you use the private key to verify it.
Although not exactly convenient, this method is very effective at protecting your cryptocurrency transactions.
VPNs have long been used by individuals as well as companies and governments to secure their online communications. Not only do VPNs reroute your traffic – they also encrypt all the data that travels between your computer or device and the other endpoint, such as a website or a server. Top-rated VPN services like ExpressVPN are widely used by privacy-sensitive groups – hackers, journalists, activists, etc.
Using VPNs is an excellent way of improving the security of your cryptocurrency transactions. It ensures that no one is able to monitor your traffic or intercept your data when sending or receiving payments. Many quality VPNs exist on the market and you don’t need to pay a lot to get one. If you are looking for a free VPN solution, follow the link for some candid reviews.
Cryptocurrency transactions offer a huge range of advantages over other methods. That being said, these transactions are also prone to a number of risks.
The good news is that you can mitigate these risks by following some basic security measures such as the use of a VPN, a combination of hot and cold wallets, and using offline storage for your private key. Adopt these strategies before disaster strikes and safeguard your online transactions.