Despite being digital, cryptocurrencies are vulnerable to thefts and online scams. However, crypto organizations are constantly engaging in conversations and deliberating on how to reduce their threat perceptions. One of the easiest ways to reduce the risk is to diligently secure digital signature and password of the user with most of the digital coins offering such protections as a part of their security package. The information related to transactions are encrypted and safely recorded on the distributed ledger technology famously known by the name blockchain.
Blockchain and Security
You have to access to the password on the private or public blockchain to transfer the ownership or have access to the ledger. The digital signature of the user is also part of the package without which you cannot have to access the ledger. To provide high security, most of the organizations have a provision of strong algorithm which keeps digital signature of users safe. However, hackers do sometimes change the whole ledger, i.e., replacing the original ledger with a new one which has the record showing that your digital currency has been transferred to some other account with you authenticated the transaction with your digital signature.
That is exactly where the distributed ledger technology comes to the aid. Blockchain uses a decentralized mechanism to validate any new copy of the ledger and hence block any new acceptance permitted by validators in the network, aka, miners. In other words, use of blockchain will provide double security to the transactions in terms of digital signature and consensus mechanism.
Still, there are some instances where hackers can steal the password and hack the computer system or the whole server to transfer the digital currency. Such a transaction will be validated by blockchain, and the money will be lost just like the paper currency. To make things a bit tricky, you don’t have any third party like banks or financial institutions to trace the transactions or thefts.
However, if the grieving party can identify the hacker, then it can claim the damages. It will be impossible for hackers to execute some heist and not leave any digital traces behind. With the evolution in technology, we are witnessing new tracking services in the crypto field, which offers to track down the stolen digital money by analyzing traffic data and IP address, among other things. This traceability makes chances of recovering digital money brighter than the case with paper money.