Digital Currency – The Security Perspective
After exploring the near-, mid-, and long terms measures of cyber security with respect to digital economy, we shall now explore another aspect of digital economy. While not still prevalent in the main stream, especially in the fast growing ecommerce industry in the world, digital currencies have made a significant impact on the e-commerce industry.
Let us look at the security perspective of digital currency in the next few blogs.
Digital currencies like bitcoin have been there since 2009, but the main stream digital economy and electronic commerce seem to not trust – at least in adapting this as a standard en masse. The key is how secure digital currencies are. The usage of digital currencies have started in not-so-main stream industry and that has done its part for the main stream e-commerce to avoid acceptance.
Bitcoin is the most evolved and accepted digital currency. The key technology behind bitcoin, Blockchain allows verification and trust over the transaction, while maintaining anonymity of the transaction. This trust is verified by a complex network of computers that run complicated algorithms. While the transactions costs are lower, as each transaction is rewarded by ‘blocks’ or ‘cryptocurrency’, rather than actual monetary transaction.
Bitcoin has gained respect from Germany as a ‘unit of account’ and the US Federal Reserve Chairman has told the system holds ‘long term promise’. Bitcoin has surged over a period, and this is due to lot of ‘offshore transactions’. The price surge has triggered demand, leading to hoarding and thefts of the digital currency. In 2013, around $1m in Bitcoins was stolen from BIPS, a European exchange. GBL, a Chinese Bitcoin exchange, abruptly vanished in October, taking $4.1m-worth of deposits with it.
With digital currencies becoming part of the evolving cyber transaction, money has morphed from actual cash in lockers to vulnerable lines of software code stored in databased. Banks, merchants and consumers are yet to fathom the vulnerability of this situation. The offshoot of this vulnerability is the ever increasing risk of cybercrime and cyber terrorism.
Notwithstanding this, digital currencies are being adopted by tech organizations and companies. The evolution of the threats for digital currencies and the counter measures by both exchanges, banks and technology companies would be two key juxtaposing factors of the success of digital currency.
In our next blog, we shall discuss about the underlying technology ‘blockchain’ of Bitcoin from usage, vulnerability and countermeasure perspective.
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