Cryptocurrency Industry’s Defining Factor Will Be Secure Storage

Blockchain, Crime, FinTech | June 13, 2018 By:

Cryptocurrency may rely on blockchain technology, but it is not unassailable. With the rise of blockchain and decentralized networks, users now have the power to control their own finances, however they also may not realize that they face more personal responsibility in terms of keeping their digital assets safe. In the case of cryptocurrencies like Bitcoin, its current and potential value attracts investors, as well as cyber criminals.

Over the weekend, the industry faced another setback. Coinrail, a South Korean cryptocurrency exchange, suffered a breach and lost more than 30 percent of its reserve, or close to $40 million USD. As a result, Bitcoin fell to its lowest price in the last quarter. The broader cryptocurrency market is also currently in sell-off mode.

And Coinrail is not alone in its struggle to keep users’ investments secure. Bitfinex, another cryptocurrency exchange, infamously saw a $68 million hack in 2016, in addition to suffering a domain denial of service (DDoS) attack last week.

Recent cryptocurrency hacks and losses are continuing to draw out doubt from audiences who may not have solid trust in the technology yet. While hacks can happen even when using fiat currencies, the public is ultimately reviewing each misstep the industry makes to determine its fate. Cryptocurrency’s infancy will set the stage for whether or not it sees mass adoption on a global scale.

As a result of the hack, Coinrail informed its users that the company moved approximately three-quarters of cryptocurrency funds to cold storage. But users participating in the blockchain should ask themselves – why not use cold storage from the start?

Cold wallets, those that never connect directly to a computer or the Internet, provide a number of benefits that are especially necessary in an industry where uncontrollable and unforeseen circumstances are the norm. In addition to giving the user full control and security over their private keys and encryptions, cold wallets ensure users aren’t affected by third-party liabilities, rendering these wallets the safest way to store crypto-assets.

The promise of a strong alternative currency has attracted much interest, particularly from those who may not know much about the technology. As such, education is crucial to continuing to push the industry forward. Users must be made aware of the risks of using hot storage. New users often assume that they can invest and get the hang of the technology later. In many cases, however, they are putting themselves at risk of losing their assets by relying on a third party to protect them.

Moving assets into a cold storage wallet isn’t just a choice; it’s a necessity. Cold storage may have been relatively inefficient in the past, but innovation has made it possible to solve this issue and make cold storage the standard it should be in the industry. Cryptocurrency users – new or seasoned – should consider a cold wallet in either of the two scenarios: as soon as they have medium- to long-term investments or prospects in their portfolio, or at any point where they determine that the loss of their tokens will have an adverse effect on their investments or economic standing.

While cryptocurrency will continue to pique the general public’s interest, the industry faces a serious risk of stunting its own growth by not moving toward more secure methods of storing crypto-assets. Building the future of the blockchain means taking a stand to better protect users and helping to educate them on the best options to protect their hard-earned investments.