Cryptocurrencies are extremely secure due to the fact that they use cryptography to control access to the network and verify transactions. Cryptography is the study of algorithms and codes that work together to protect data and information. In order to send money digitally, you need a means of identifying who you are sending funds to and verifying that the recipient actually owns the funds being sent. Without these two processes, any transaction would be vulnerable to fraud.
In traditional banking systems, users provide personal information about themselves, such as name, address, date of birth, social security number, etc., to financial institutions in order to obtain credit cards, loans, mortgages, etc. This information is then stored in databases that are accessible by banks and third parties. When someone wants to make a purchase using a credit card, bank account, or loan, they must provide the same information again. If the information provided is incorrect, fraudulent, or stolen, the user could lose access to their funds or even incur fees.
With crypto, however, no personal information is ever shared. Instead, each person controls their own private keys and generates their own public/private key pair. This key pair is used to identify them and their transactions. No one else knows what the private key looks like, only the owner does. Once the owner sends funds to another party, both parties generate a hash value based on the contents of the message and compare it to the hash value generated by the sender. If the hashes match, the transaction is verified. If not, the transaction fails and the funds are returned to the sender.
This process eliminates the risk of identity theft and ensures that the recipient receives the funds without having to re-enter sensitive information. Because of its security features, crypto is often referred to as “digital gold” and is becoming increasingly popular among consumers around the world.
