Bitcoin is increasingly gaining popularity as a convenient peer to peer electronic cash transfer system. The number of individuals and organizations turning to this mode of payment is on the rise. What are the requirements in order to transact safely with Bitcoins or with other cryptocurrencies? Without relying on financial institutions to complete the transaction you're on your own it would seem.
What is it that attracts people to virtual currencies like Bitcoin? One may well be that cryptocurrencies don't charge you any transfer or transaction fees.Now, if the safety considerations behind this have made you to hold back, this article will explain to you how to transact safely with Bitcoins.
Why you need to highly consider the safety of your bitcoin transactions.
Bitcoin offers anonymity
Bitcoin operates without any regulation and the transactions involving bitcoins are anonymous. They rely very heavily on a platform of trust. As they are not regulated by governments or government institutions, there can be some shaky ground for a few users of this currency.
Unlike with banks, with Bitcoin, there is no insurance coverage for any losses you may incur when using their system.As with any electronic system, Bitcoin is susceptible to intrusions by hackers, and if you have not taken measures to secure your Bitcoins, you can incur huge losses from such encounters.
To reduce your vulnerability, follow these steps so you can boost the safety of your Bitcoins.
Use credible Bitcoin exchanges
To acquire your Bitcoins, you need to get them from an exchange. Research widely before deciding to settle on using a particular provider. Since some may offer you very attractive rates, but once you submit your funds for the purchase, they fail to remit any bitcoins to you, you need to exercise caution. To not do so can result in huge losses for you.
Get your bitcoin wallet and secure it
Your bitcoin wallet is the equivalent of your bank account. Having it will give you the ability to take charge of your transactions. Here are some ways in which you can secure your bitcoin wallet.
Get your wallet from a credible provider
So that can transact safely with Bitcoins, and not lose your bitcoins to fraudsters, do your due diligence on the provider you intend to get your wallet from. Not all providers are trustworthy, and some people have fallen victim to their fraudulent schemes.
Backup your Bitcoin wallet
This can be done online where you use a strong, easy to remember password. This will limit the access to your wallet to only you, and those you choose to share your password with.
Have different wallets for different transactions
You can choose to have a wallet for making payments, another one for receiving payments, and a third wallet for storing few bitcoins for day to day transactions. It's a little hard to think of using Bitcoin for day to day transactions for many, but this is a growing trend.
Keep only a small amount of bitcoins in your wallet at any given time
This will, in turn, limit the losses you are likely to incur should the system be hacked. Your grandparents probably told you not to put all your eggs in one basket. That's some solid advice when transacting with Bitcoin.
Encrypt your password
This will mean that your password is encoded, and it cannot be decoded even if an unauthorized person intercepts it. Some encryption systems can be more effective than others, so choose one that you believe will do the best job for you.
Use cold storage
No, we're not advising that you store your Bitcoins in the freezer. To put it simply, back up your wallet offline. This can easily be done on a USB drive, external hard disc or on paper.
Use bitcoin escrow services
Escrow services involve having a third party, or intermediary, being part of the transaction. The buyer deposits funds for any particular transaction with the intermediary, who releases them to the seller after meeting all the terms and conditions of the sale.
The second way in which escrow services are used is by having a multi-signature, where the buyer, seller, and the intermediary have to sign before a sale is concluded and funds released.
You can transact safely with Bitcoins if you take the measures outlined above. As you may have noted, much of what you need to do touches on securing your Bitcoin wallet. By taking the outlined measures, you will be able to transact safely, and confidently.