One of the key questions people have when they hear about electronic finance and e-commerce that doesn’t somehow involve a bank is “how can I be sure my money is safe?” It’s a reasonable concern. With all the stories in the mainstream media about data breach this and missing money that, it is easy to imagine electronic transactions being tempting targets for hackers.
The truth is electronic commerce isn’t quite as perilous as the breathless press might have us believe. Billions of dollars in transactions are processed every year around the world without a problem. But then again, those transactions go through traditional financial networks operated by national and international banks. What about cryptocurrency? If a person stores their Bitcoin in an online “wallet,” for example, how can they be sure their funds are going to be there when they come back?
How Bitcoin Works
Are Bitcoin Wallets Safe?
The design of a cryptocurrency network is such that all transactions require not only the private electronic “key” belonging to the money’s owner, but also requires the rest of the network’s agreement that any particular transaction is legitimate. Once a “block” containing this transaction is written into the network’s “ledger,” it is virtually impossible to tamper with or delete.
When “coins” are transferred to a person participating in a blockchain network, they are stored at a unique address and encrypted by a private key only that person knows. Without the key, it is impossible to transfer the coins from that person’s possession to anyone else.
Wallets
A “wallet” is where a person’s coins can be “stored.” Like the person’s own identity, a wallet is encrypted and locked with a private key that only its owner knows. Inside the wallet are the private “keys” for all the Bitcoins that have been transferred to them. With a wallet and the associated encryption key, its owner can access the information about the Bitcoins stored inside and then transfer those coins to others to make purchases, give gifts, and so on. Companies like Jubiter offer digital wallets and are open for business six days a week from morning until midnight.
Wallets can be stored by the owner themselves on their computer or more frequently on some kind of hardware device that can be taken offline and put in “cold storage” where it can’t be accessed by anyone through electronic means.
The reason wallets are relatively safe is because of the strong encryption used to secure their keys. Not only will the blockchain network refuse to allow one person to spend another person’s coins, but even getting to the coins in the first place could involve overcoming the private encryption key securing the owner’s wallet. Using a service like Jubiter gives you all of the benefits of a digital wallet alongside social accounts, two-factor authentication and considerable license support.
Bitcoin and the blockchain network are not perfect by any stretch of the imagination. More than a few incidents of lost digital currencies have taken place over the years. At the same time, measures like the digital wallet are a good way to add further protection to what is already provided by the blockchain itself.