Bitcoin has become a popular digital currency in the past several years. Its price has fluctuated tremendously in the past five years. And now, everyone is rushing into buying it by using various applications such as Coinbase. As always, the bad actors (i.e., hackers) are on the prowl to exploit weaknesses. These weaknesses include the lack of preventive measures such as encryption and backups to secure the wallets. Therefore, once the wallet has been hacked, there isn’t much the victim can do to regain the digital currencies.
It is important to remember that Bitcoin transactions are transparent. In other words, all Bitcoin transactions are public, traceable, and stored on the blockchain network. Bitcoin addresses are the only indicators that show where they are stored and transmitted. Our research indicates that you should be able to protect your privacy if you use a new Bitcoin address every time you receive payment. Technology experts recommend that it may be prudent to use several wallets for different objectives – i.e., you can have a software and hardware wallet that can be used for a different reason. This way, there would not be a direct link between the cryptocurrency transactions.
Technology experts recommend not posting a Bitcoin address on a public domain such as a social media platform. The whole point is to avoid publishing information regarding your digital currency transactions since it could let third parties identify your Bitcoin address. It must be noted that Bitcoin’s network is a so-called “peer-to-peer” network that can be used by the general public. Also, in this kind of network, the user’s Internet Protocol (“IP”) address can be logged without your knowledge or consent. Therefore, it’s important to use some kind of masking software (e.g., ToR) or other technology to hide your computer’s IP address. ToR, which is also called “The Onion Router” provides a way for its users to mask their identities. It was originally designed for the military but it has been used by civilians for several years.
Bitcoin security and privacy should improve in the future especially because it has gained popularity. The applications that provide transactional services are thinking about improving their Graphical User Interfaces (“GUI”) so the digital currency addresses won’t be reused again.
The fact that digital currencies have gained value has made them a target for hackers. They are, and will be, thinking if new ways to breach the network and extract the cryptocurrencies in a clandestine way. It is important to note that any kind of personal or confidential information that correlates to the user’s account such as name, address, telephone, bank account or credit card account information can be extracted and used for nefarious purposes. It’s important to have preventive and reactive measures on the network system. Users should read previous articles to understand what tools and techniques can be used to minimize the risk. For example, having a software and hardware wallet with regular backups can be helpful. It’s always recommended to print your private key and store it in a safe place in case it is stolen. Also, using encryption technology for communications can also minimize the risk because it scrambles the data that’s being sent over the internet communication channels. The technology experts recommend encrypting online and offline backups on a regular basis to avoid using a “single point” of entrance.
Congress is in the process of passing new laws to establish data privacy and security protection for consumers. For example, the Setting an American Framework to Ensure Data Access, Transparency, and Accountability Act (“Safe Data Act “) was introduced on or around September 17, 2020 to promote privacy and security. This law, if it could be passed by the House and Senate, and signed by the President, would certainly help protect users against data breaches. However, it seems that it did not receive the necessary votes. Be that as it may, the state and federal legislators are formally charged with the task of passing sensible legislation to promote cybersecurity and to protect citizens.
Our law firm assists clients in matters related to privacy and cybersecurity and the state, federal, and international laws. Please contact our law firm to speak with an internet attorney at your earliest convenience.