Security of the bitcoin network had not been a major concern until Mt. Gox happened! There are many theories about who the masterminds of that bitcoin heist may have been, but the bottom line is that customers lost their investments. And now all bitcoin users are aware that hackers present a major threat.
The bitcoin network is of itself very secure. In fact, most bitcoin heists take place at the wallet level. In light of the emergent mainstream adoption of bitcoin for an alternative currency, we are left to wonder what loopholes might there be, that could disadvantage either one of the transacting parties.
Here are some of the drawbacks of bitcoin that may encourage fraud.
- Unverifiable wallets and exchanges
If you conduct a simple Google search of wallets, you’ll see profiles of many wallets that claim to be operational.
The wider concern here is that some wallets may have a dark origin; in that case, they will close shop someday, and run off with the customer bitcoins.
It’s hard to tell which company is “fraud-proof” because the world of cryptocurrency favors anarchical designs, in the sense that, there are no policymakers or oversight groups.
- No chargeback
If you bought an item from company X or Y and for some reason, it wasn’t exactly what you had been informed it would be, you may file a dispute, and you’d be given back your money.
But when it comes to bitcoin, a transaction once carried out cannot be reversed for whatever reasons. Scammers have a leeway now. I mean, they’d market you into an illusion (as they always do), and once you paid for it, it is bye, bye.
- The possibility of double spending
Although the bitcoin network is designed to prevent double spending, there is still one instance it could go through.
After sending an amount of bitcoins as payment, there’s a confirmation window, during which the sender could re-spend that amount elsewhere, effectively scamming the first payee!
The bitcoin network is adequately safe to transact on. The most important action in optimizing the security of your bitcoins is using a hardware wallet and common sense.