Is Bitcoin safe?
Bitcoin is the best-known of the cybercurrencies. There are a number of others, and they all work in a similar fashion in how they are created (through data-mining) and their storage. They are traded in ways similar to securities.
Bitcoin itself seems to be a safe item. Whether it is a good investment is beyond my expertise. The SEC — U.S. Securities and Exchange Commission — is looking at ways to manage the investment methods of the cyber-currencies and is proposing some controls. Again, talk to an investment professional on these matters.
There are two areas that can be a way to totally lose what you have put in Bitcoin and cyber-currencies. That is the concern of this column.
Bitcoin and cyber-currencies are kept in digital wallets and the transactions are maintained through block chains. The wallets require when you create them to set up a password and/or other secure ways to access them.
Nobody else knows what secure methods you have used to secure them. Nobody else has any access to your Bitcoin or cyber-currencies without these codes. To make them more secure so they cannot just be guessed, most wallets limit you on attempts.
Now for the dangers.
First danger is if someone else guesses your password/secure control, then at that point they have full access to your money.
The problem is if they steal it then, or take unauthorized access, there is no way to recover the money, unless you know who it is and can get a court to agree — and then that’s if they have any left to get back. So, theft of your secure login information means that most likely you are losing all you have in it. It is not like a bank with insurance, etc., to reimburse you. You’ve lost it.
The second danger is if you forget or lose your secure access codes, likewise the money is gone. There is no backdoor any organization can go in and access it and then give back; it is gone. No one can then access it.
Two horror stories I have heard on this is, first, a person who bought Bitcoin a number of years ago and lost or forgot his code. It has grown in value a ton and, as they have tried combinations they think is it, they are down to one last attempt. That Bitcoin/money is gone if it’s not remembered now.
The second is a person who bought some Bitcoin a number of years ago and now has some type of dementia and does not remember. And no one in his family or friends has any idea, so that investment is totally gone unless his mind clears on that one day and he tells someone the code. So be cautious in investing in Bitcoin. I am neither suggesting or saying do or not do. But if you do, it’s critical to write down and record in several places the codes. A bank safety deposit box may be good idea or give to a trusted individual (but remember danger one).
Bitcoin does have lots of interesting possibilities and has a lot of public interest so we will see what happens.
Remember, Bitcoin only started in 2007 so it is very recent; the United States’ dollar started about 1792 so it’s been around longer. With the dollar, it was a way to stabilize currency in the U.S.A., as each state had done their own money prior and much of it was worthless.
Thanks to several people at the Walker Chamber for questions on this.