Over the last two months there has been a lot of hype surrounding cryptocurrency. There have been many stories of people who have made a fortune overnight by selling Bitcoin that they have been ‘mining’ for years, with other cryptocurrency surging in value as a result. Anyone can participate too – you can buy cryptocurrency right now and if you were to believe the stories, you’ll be making money in no time. What’s not to like about making a few quid for little effort?
As it happens, at the time of writing, the value of cryptocurrency has fallen quite dramatically since the beginning of the year. According to Cryptocompare (1), 1 Bitcoin was worth around £11,500. Today, it is worth just over £6,000, a fall of 47% (2). Another popular coin, Ethereum, has suffered a similar fate. What was once worth around £950 will now buy around £600, a fall of 37% (3). So like any other investment, it is a risk. But with so much uncertainty and an unregulated market, is it a risk worth taking?
What is cryptocurrency?
Cryptocurrency are ‘units’ that exists in the digital world, and those units have monetary value. It is totally decentralised – units of any particular currency can be ‘mined’ by servers run by anyone in the world. cryptocurrency is stored in digital wallets that are encrypted using highly sophisticated encryption techniques. You can then transfer cryptocurrency from one wallet to another.
‘Mining’ is the process in which a digital currency is created. It uses the processing power of a computer to generate these units of currency and store them in a digital wallet. Anyone can do it – in fact, many people have build servers and PCs specifically to mine cryptocurrency, and they do so 24 hours a day, 7 days a week.
Can I make money from cryptocurrency?
Let’s make one thing clear – I am by no means a Financial Advisor, and Get Safe Online is not here to advise on how to make money. The answer is yes, potentially you can. For example, you could buy £10 worth of a digital currency and if it increases in value, so does your investment. The opposite is also true – if it decreases in value, so does your investment, as in my case. Yes, I was intrigued by the concept and so I bought £50 worth of cryptocurrency – £25 of Ethereum and Bitcoin each in early January. Since then, it has done nothing but fall. That investment, after transaction fees, is now worth a whopping £16. However, had I invested in early December, it would be a different story. C’est la vie, as they say!
But as appealing as investing in the cryptocurrency market might be, it currently carries great risk. The market is unregulated and the system is decentralised. With the right knowledge and resources, anyone can make a coin and apply for what is called an Initial Coin Offering (ICO) to raise funds for it. This, and with the hype surrounding cryptocurrency, has of course attracted criminals and scammers.
Fake websites
There has been reports of fake websites being setup to entice potential victims to hand over their personal data, pretending to be genuine ‘crypto exchanges’ (a place where you can exchange one currency for another), or cryptocurrencies looking for investment. Malware is also being installed using a previously known exploit that installs itself on victims machines, and uses their hardware to mine for a particular cryptocurrency and sending it back to the hackers wallet. There is also evidence that criminals have been using the cryptomarket for money laundering schemes.
Many governments are now are looking at regulation. Commercial banks are also raising concerns – earlier this week, Lloyds Bank and Virgin Money announced that they are banning users from purchasing cryptocurrency with credit cards, in fear that it could lead to customers running up tremendous debt on risky investments.
How to protect yourself
Investing in cryptocurrency involves real money – your money. Think long and hard before making any kind of investment. Research the industry properly before handing over personal and financial data. Understand how it works, find out what sites are trusted and what sites are not. Perhaps you know someone who has already invested in cryptocurrency? Perhaps you know financial experts who have looked into the industry? Ask them questions first, get a feel for what you could be getting yourself in for.
Tips to help protect yourself
- Unsure about anything? Play it safe – don’t invest. Don’t hand over any personal details or card numbers to anyone. Your personal data will always be more valuable.
- Be wary of e-mail scams. If you receive suspicious or unexpected e-mails asking you to open or click on any attachments or links, don’t do it. Also remember that banks will never e-mail you asking for personal details, or to ‘confirm’ details out of the blue.
- Be wary of fake websites. If you’re concerned or have any doubts about a website , do not hand over any personal details. It could be there to harvest personal data – your personal data. The first thing to look for is the green padlock in the address bar – if there isn’t one, then your connection to the site is not encrypted, which is a good sign that it is a fake website.
- Ensure that your Operating System is fully patched and up to date. If you are still using older Operating Systems such as Windows XP or Windows Server 2003, look to upgrade at the soonest opportunity.
- If you have found yourself to be a victim of Cybercrime, you can contact Action Fraud to report the crime https://www.actionfraud.police.uk/
- If after all you have decided to invest into some cryptocurrency, here is my last bit of advice – only spend what you can afford to lose, and no more.
Mat Hasker is a web designer and developer, musician and keen online gamer
(1) CryptoCompare https://www.cryptocompare.com
(2) Comparison BTC to GBP taken 08/01/2018 – 07/02/2018 https://www.cryptocompare.com/coins/btc/overview/GBP
(3) Comparison ETH to GBP taken 08/01/2018 – 07/02/2018 https://www.cryptocompare.com/coins/eth/overview/GBP
