How Safe is Cryptocurrency?

Cryptocurrencies have been growing in recent years thanks to Bitcoin (BTC), Ethereum (ETH) and blockchain technology. Nowadays there are more than 7,000 different virtual currencies in the world and the number of tokens released to the market increases on a daily basis. 

However, one of the main questions that users of cryptocurrencies have is related to how safe is cryptocurrency? Before we start, cryptocurrencies are very safe (in general). If we talk about Bitcoin and the largest digital currencies, then we can be sure that they are safe. However, we should always do our due diligence and understand whether they have flaws or not. 

Disclaimer: this is not investment advice. We are not financial advisers. This is for educational purposes only. Never invest more than what you are able to lose. 

What is Cryptocurrency?

Before we start, cryptocurrencies were created back in 2008 with the official Bitcion white paper. The term cryptocurrency makes reference to currencies that are based on cryptography and blockchain technology. Some of the largest cryptocurrencies include Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC). 

You can use cryptocurrencies to pay for goods and services, to speculate with their price and also to send and receive payments or international transfers. There are many other things you can do with some of these virtual currencies, including participating in governance voting and having access to unique features in a wide range of blockchain platforms. 

How Safe is Cryptocurrency?

Yes, cryptocurrencies are safe. We are making reference to Bitcoin (BTC), the largest virtual currency in the world. We can also say the same about Ethereum (ETH) and Litecoin (LTC). All these virtual currencies are safe and can be used by individuals to send and receive payments, process transfers and pay for goods and services. 

How do we know if a cryptocurrency is safe to use? Well, one of the ways to understand whether a cryptocurrency is safe, is to see their hash rate if they are Proof-of-Work (PoW) cryptocurrencies. Basically, PoW virtual currencies require miners to process transactions and confirm their validity. 

For this effort of controlling each of the transactions taking place on the network, they have to process very hard calculus. These calculus require large amounts of energy to be processed because they are more complicated as new users try solving these difficult puzzles. 

The energy miners use from specialized hardware machines (called ASIC) is measured in hashes per second. The larger the ASIC machines processing this information the more difficult it will be for other malicious entities to attack a cryptocurrency. 

These blockchain networks are protected by the power of the miners that process transactions. We need to be worried if there is an entity or a relatively small group of miners that would be able to control more than 51% of the network. 

Nowadays, Bitcoin is the safest crypto network in the world 135.234 million TH/s per second according to data provided by Blockchain.com. If the network is attacked by a group of miners or an entity, they would need half of these TH/s and a lot of computing power to process the attack, that may be more costly than profitable. 

Thus, Bitcoin and other cryptocurrencies end up being very secure to send and receive money and information. This includes smart contracts for the Ethereum network and fast and cheap transactions for the Litecoin cryptocurrency. 

Take into consideration that other virtual currencies may not be as secure as these three we used as an example. Ethereum Classic (ETC) tends to experience 51% attacks several times each year. 

This is harmful not only for the ETC community but also for the entire crypto space. Large companies and individuals must be sure that virtual currencies are safe and that they work properly without any flaws. 

Another way to control the safety of a cryptocurrency is by controlling the code, which is generally open-source. BTC, ETH and LTC have been tested and audited many times by developers and companies, which didn’t find major flaws in their codes. 

Conclusion - How Safe is Cryptocurrency?

To the question “how safe is cryptocurrency?” we can definitely answer that they are very safe. This is due to all the reasons that we have mentioned in this post. Bitcoin, Ethereum and Litecoin. Despite these being some of the most secure networks in the cryptocurrency market, other smaller cap coins may not be as secure as these three. Thus, it is highly necessary to understand whether we are talking about large coins or small coins with few years in the space.