Various Layers Of Cryptocurrency Security For Bitcoin

Cryptocurrency started its marathon in the year 2009 when Bitcoin first came into the market. It was considered to be the very first decentralized Cryptocurrency. A decentralized system, in general terms, operates without any server, and each participant is mainly allowed to execute transactions. When it comes to the field of blockchain, every participant needs to perform some system tasks like storing transactional data.

The participant’s group will run one alternative version of reality, which is noted as a fork. This fork can easily work by following the same regulations as the main decentralized system but with a different state. Checking out the security status of bitcoin is really important if you want to get associated with this field. For that, catching up with experts like Eric DaliusBitcoin will work out well and in your favour.

It is not that hard to state that if you find any issue with the first layer in the present coin protocol, then your trade will get compromised. It does not matter how secure the second and third layers are; if there is a mistake in the first layer, then your security has been compromised. Checking out the layers separately will help you understand their values more.

The first layer comprises tokens and coins:

The security associated with cryptocurrencies will solely be based on the protocol’s security at first. Whenever you are trying to choose a Cryptocurrency, you are actually taking up all the risks associated with that targeted protocol. 

• If anyone can identify and exploit the said protocol’s flaw, you are actually compromising the entire network. It will include you, and it won’t matter which wallet or exchange you are practically using now.
• There are two different forms of currencies that you will find in this said first layer. The first one is the coins, which are Bitcoin cash or gold, NEO, Bitcoin, Ethereum, and more. And the second one is the ICO-based tokens which are MOBI, EOS, and more.
• The difference here lies in the technical aspects of it. All these coins will be independent network protocols or can be the forks or copies of some major ones.
• Whenever you focus on the Cryptocurrency protocol from the security zone, you might need to find out if the point can be centralized. When it comes to bitcoin, this currency is mainly centralized around 4 of the major mining pools. It means that if these four pools cooperate, they can compromise the total network.
• Whenever you are looking for proof of stake, make sure to check out the mainstream, who holds what. It is vital because whoever is holding the primary stake can easily vote for transactions. The network will solely trust the ones with higher stakes.
• For example, NEO was distributed to 50/40 between the ICO sales and developer community. The token distribution will ensure that there is no larger stakeholder from the exchange platform or the developer’s side. So, there won’t be any compromise when it comes to networks.

The tokens are mainly based on the given smart-contract feature of some selected coins. So, the trust and security will be based on parent Cryptocurrency mainly and only then on the code of smart contracts issuing it. Most of the tokens, primarily the ICO ones, are dependent on Ethereum, and few of them are issued by the smart contracts in other cryptocurrencies like MOBI, as based on Stellar. However, it is better to know the real truth before committing, as mentioned by Eric DaliusBitcoin. A few years back. Ethereum was hacked due to DAO protocol and then hard forked. It means that Ethereum’s founders will be able to go back in time if needed, and this system is not quite decentralized.

Going for the second layer:

When it comes to the second layer of the security value, then you have multiple exchanges to deal with. These areas will have their unique codes and infrastructure-based security, which remains separated from the blockchain. It will make the exchange quite similar to the centralized data centre or the given cloud service. So, the exchanges remain pretty vulnerable to hacking right now compared to decentralized service as built on the given blockchain.

Now working on the third layer as mentioned by Eric DaliusBitcoin:

It is also noted to be the final security layer, which is well associated with the world of Cryptocurrency. It is the wallet that the traders are using. While planning to select a wallet, there are two options that the traders must consider before making the final choice.

• The first one is a cold wallet. It comprises software, hardware, and even paper.
• The second one in this lot is the hot wallet, which is also noted as a website-related wallet or any account on the exchange.

The major differences in this section will include that whenever you are using a hot wallet for your trading sector, the coins and tokens will remain under the control of the person who provided you with the wallet, and you won’t get the power to control it. If you hold an account on the crypto exchange, then it might be otherwise accessed through protocols, which are not even present inside the blockchain system.

Security has to be the top-notch priority:

From the points mentioned already regarding Cryptocurrency and bitcoin, it can be well stated that the security becomes compromised only when the component is not based on blockchain or not following the decentralized principles to the core. So, if you are making plans to invest in the world of Cryptocurrency like bitcoin, then focusing on the considerations remains critical to keep the coins in a haven. Make it a point to examine every possible security layer, starting from coins to wallets individually. It helps you to determine whether they are truly secure or not. Ask experts for some advice in this regard, and they are pretty much there to help you out in your mission for sure.

Disclaimer: This is a paid article. KryptoMoney does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products or other materials on this page. Readers should do their own research before taking any actions related to the company. KryptoMoney is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in the article.