Decoding Bitcoin by Claude Kramer

Author:Claude Kramer
Language: eng
Format: epub
Tags: bitcoin, satoshi nakamoto, cryptocurrency, digital currencies, criptocurrencies, bit mining, btc, armory, online wallets
ISBN: 9789877440034
Publisher: Cooltura
Published: 2015-03-03T16:00:00+00:00

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Anonymity and Security

Bitcoin is designed to provide high privacy standards. Although it doesn’t equal the levels provided by cash, given that the transactions leave public records, using this virtual currency is much more private than using credit cards or bank instruments such as checks or letters. Bitcoin payments can be made without providing personal information, which offers protection against identity theft. This currency can also be protected by security copies and encryption.

As with physical currency, this virtual currency can be stored according to different levels of immediacy and, of course, security. Suppose you have $100,000 in cash. A logical way of distributing that amount of money would be to leave the biggest part in a security box and carry what you think you´ll need for one or two days. Bitcoin wallets fulfil the same function as real wallets, where money is at hand, immediately available, but also exposed to thefts or losses. In the virtual world, mobile phone apps enabling Bitcoin payments are more vulnerable. In consequence, the system provides more rigid and undecipherable storing tools, with encryption keys as mistrustful as bankers themselves, which is essential for the Bitcoin experience.

Nevertheless, the system is not protected from attacks which may cause a loss of millions. The most tragic example is the well-known attack to Mt. Gox (based in Tokyo, Japan) in February 2014, which caused the loss of 800,000 BTC and led the company to bankruptcy.

People who mistrust this system are usually concerned about security issues and the protection of their eventual inversions, and they also wonder how they can trust it when the most top military secrets have been hacked throughout history. Of course, it’s impossible to guarantee the invulnerability of the network, but it’s worth remembering that all our bank transactions and the savings stored in the traditional system are supported by a confidence pact respected by the most powerful players of global computing. Although keys and passwords are used to protect users from ordinary scammers, it’s highly advisable to have a security strategy consistent with the currency stored.

Another issue concerning key management is what happens when the owner dies and has not provided that information to anyone else. In this case, the keys must be considered a legacy. The holder of those keys will be able to decide what to do with the money and if there isn’t such a holder, the bitcoins are withdrawn from circulation. This will happen in several situations.

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