, 2 years ago

Are cryptocurrencies safe?

Cryptocurrencies are in fact one of the safest assets in terms of transaction security. Their underlying technology is either defined by blockchain or distributed ledger technology. Both technologies prevent that a third party can intervene in transactions or create new coins or tokens out of thin air. Therefore, all transactions can be monitored and are verified by the network as well as the supply of each coin or token.

While each crypto approaches the very security features differently, they are generally speaking all safe to use, because they all share the following basic features:

  • All data is immutable
  • All transactions are transparent
  • Data is stored decentralized and requires network consensus
  • No middleman or third party is needed nor can they intervene

“Crypto” stands for Cryptography

Another core feature of all crypto is the cryptographic security that makes it absolutely impossible to crack. Meaning that your personal funds are secured by a digital signature that is impossible to guess for any man or computer on earth.

To give you an idea how impossible this is, lets take a look at Bitcoin. Bitcoin generates a pair of keys for each Bitcoin address. A public key, were you can send or receive BTC and a corresponding private key. The private key is the secret that allows you to unlock and control the Bitcoin on the corresponding public key.

There are about 1.33*1050 atoms in the world. To help you to visualize this number a little bit better:

133,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000

Each Bitcoin private key consist of 78 digits, meaning that there are more possible combinations of private keys than atoms on our planet. It makes it impossible to guess a private key that has Bitcoin on it and it also makes it absolutely impossible that two persons will generate the same private key.

The math behind Bitcoin and other crypto relies on proven scientific models in order to generate those keys. Many other crypto rely on a similar or the same methods since Bitcoin was their blueprint.

Am I allowed to use Crypto?

Most industrialized countries have recognized crypto and other digital assets legally. Meaning that all customers of LiteBit can be absolutely sure that it is perfectly fine to send, receive, buy and sell crypto anytime.

Most countries don’t treat crypto as actual currencies, but as the same as commodities. This legal status has a couple of benefits. For example, people living in Germany can sell their crypto and don’t have to pay taxes on their profits as long as they are holding their assets for at least one year without any interruption.

This rule comes of course with a few caveats, but it shows that this legal status has its benefits even if governments don’t recognize crypto as money.

And to conclude the initial question: Yes, crypto are perfectly safe in every sense.

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How to take self-custody: own your coins

Dec 09, 2022

Unlike in traditional finance, in crypto you can truly own your money. Because whoever controls the cryptographic keys, controls the funds. That's a fundamental property and THE major benefit of crypto. If you don't have your keys, you don't really own your coins. If you deposit your coins on an exchange, you risk them going bankrupt. Instead, if you own the keys, then you are the custodian: we call that self-custody. How can you learn to take self-custody?

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