Are Bitcoins & Digital Currencies Safe?21-May-2015
These days, consumers are just as likely to pay for a meal with a scan of a smartphone as with a credit card or cash. However, one of consumers’ main concerns is the security of these payments- can it really be safe to transfer payment via a mobile app or a form of digital currency?
There are several different forms of digital currencies and payments:
- Digital currency, an internet-based form of currency that allows for instantaneous transactions and borderless transfer-of-ownership
- Cryptocurrency, a digital currency in which encryption techniques are used to regulate currency unit generation and verify fund transfers
- Mobile payments, money rendered for a product or service through a portable electronic device
- Near field communication (NFC), a set of ideas and technology that enables smartphones and other devices to establish radio communication with each other by touching the devices together or bringing them close together
But interestingly, despite the fact that around 40% of consumers have used a mobile payment, only 1% believe that using a smartphone-based mobile payment app is the safest method of payment. Instead, more than one-third of Americans believe that credit and debit cards are the most secure method of payment.
Part of that could be due to the fact that mobile payments and digital currencies are still evolving and catching on; only 10% of iPhone 6 users have ever tried to use the mobile payments method. Similarly, the United States, Australia, Canada, and Northern Europe are the countries with the most cryptocurrency downloaders, with between 3.4% and 10% downloading Bitcoin (a form of digital currency). Experts believe that by 2017, $35 billion per year in transactions will be performed via mobile devices, using stored credit or debit card information.
When comparing different mobile payments and digital currencies, Apple Pay and Samsung LoopPay are the most secure; these use NFC and do not give retailers your credit card information. Security is gained largely through the process of encrypting data stored on the user’s phone, and other security features include multi-level authentication, electronic receipts for cross-checking accounts, and support for fingerprint scanning. However, Symantec claims that 90% of malware attacks are now targeting mobile devices, and 99% of all newly discovered malicious software in 2012 was targeted to the Android mobile OS.
Bitcoin is the most difficult form of digital currency to secure. Although the Bitcoins themselves are secure, the user is mostly responsible for making sure nothing happens to their money. There’s no insurance from a central banking authority, and because they exist purely in digital form, Bitcoins can be lost through hacking- or even just losing your password- with little hope for recovery.
In addition to hacking (over 100 unique malware families have been designed specifically for stealing cryptocurrencies), Bitcoin users who work through a Bitcoin exchange are also at risk of “Trojan horse viruses,” which are intended to steal online banking credentials and are modified by hackers to attack cryptocurrencies. In February of 2014, Mt. Gox was hacked and lost almost half a billion dollars of its members’ Bitcoins, the largest hack of a Bitcoin exchange to date. Since the currency is not backed or insured by a central bank, the owners weren’t able to get reimbursed.
In the future, mobile payments will likely focus on partnering with customer loyalty programs as well as with major brands like Disney and Jawbone. And as more and more people begin to use mobile payments and digital currencies, security measures will improve, meaning that you’ll be able to leave the house with only your phone (or even just a piece of wearable technology) and know that you’ll be able to pay for whatever you might encounter.
If you’re curious learning more about digital forensics and how companies and consumers can respond after a security breach click here.