Protecting Your Financial Identity With Digital Currency

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Digital currency is a growing trend today, particularly among younger consumers. However, vulnerabilities impact privacy and security. Your financial identity, including accounts and investments, can be better safeguarded through cryptocurrency. But, precautions still must be taken to protect your assets.

Money Trends That Demand Security

Crypto trends impact everyday transactions, especially for younger adults, who spend their money differently than prior generations. Millennials and Generation Z are more open to digital payment and primarily shop online. Gen Z is also interested in crypto as an investment tool.

Both groups have a high level of trust in technology and digital transactions. When shopping or investing, they look for ethical, transparent companies. However, they are also less financially educated than their older counterparts, making them vulnerable to hackers.

Online Protection With Cryptocurrency

Moving to digital currency can provide more protection for online shopping. Because transactions are anonymous, data is safer from identity fraud. Another benefit is that blockchain technology can expedite shipping. Transactions are processed in real-time, allowing less error and more efficient tracking — reducing costs, waste, and delivery times.

Online shopping is not the only digital spending trend that can be safeguarded and streamlined with cryptocurrency.

Other Spending Trends Secured by Digital Currency

Millennials and Gen Z are investing in crypto, with more than half believing that these investments can bring wealth quickly and many relying on it for retirement. While that can be true, crypto volatility also means many investors are losing their shirts. With so much risk, younger consumers must be cautious when navigating the crypto market.

Some trends that can help secure investments include:

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  • Copy trading — when transactions automatically follow the actions of professional traders, reducing risk;
  • Crypto loans — investments that allow you to borrow using digital currency as collateral. If you have a great deal of crypto, those assets cover your debt if you default. But, if the market plummets, your existing payment to date also lowers;
  • Stop-loss orders — investments that allow you to set a cap for losses. If you set it to your purchase price, you won’t fall in the negative.

Today, many people also use crypto to finance their businesses. Digitizing customer payments eliminates fees, can reduce loan rates, and gets you paid more quickly. It also makes your start-up more attractive to crypto enthusiasts, opening up a ready-made market. Crypto businesses, however, carry a higher risk, such as botnet attacks that try to take over your accounts.

With so much unpredictability, you must secure both your personal and business crypto assets. One way to do that is by using private digital currency.

Private Digital Currencies: Pros and Cons

Crypto started as a way to release financial transactions from the central banking system for greater privacy. Today, many countries are developing their own Central Bank Digital Currency. Older cryptos, such as Bitcoin, have been around long enough that hackers may have developed workarounds.

These vulnerabilities have increased the demand for privacy. The response is private cryptocurrencies, which take more extreme measures to protect user anonymity.

The best way to understand how these private digital currencies work is to look at an example. Monero, one of the more popular ones, uses ring signatures, which pool signed messages together to hide member identities within the group. Monero also deploys stealth addresses for all the parties involved in a transaction and conceals the amount from anyone not involved.

But, high anonymity has its drawbacks. Take the case of the digital currency, Verge. Their privacy systems include The Onion Router and the Invisible Internet Project. These systems bounce communications, encrypt data, and hide locations, including user IP addresses. Unfortunately, these measures appeal to the less seemly side of the internet. In 2018, Verge revealed it was working with a popular explicit site, tanking its value overnight.

The appeal of private crypto to unsavory or even criminal enterprises brings the unwanted attention of law enforcement. Government regulations can work around these privacy practices when suspicious activities arise, limiting their efficacy.

Interestingly, the quest for financial privacy reduces safety, security, and transparency. By working with questionable clients, private crypto may be less popular for Millennials and Gen Z, who value ethics and transparency.

How to Protect Your Crypto

However you are using it, protect your crypto with these steps:

  • Use cold-wallet storage, which stores your crypto without connection to the internet. Choose a reliable, secure platform.
  • Traders should take their crypto off the exchange when not making transactions. Research trading exchanges and their security practices before committing to one.
  • Two-factor authentication is a must for all your digital currency transactions. Avoid using text message setups as they make you more vulnerable to hackers.
  • Put measures in place to prevent loss. In addition to stop-loss orders, you can buy DeFi insurance. DeFi stands for decentralized finance, which is free from centralized banking. It works like traditional insurance. However, you can buy DeFi insurance from a pool of providers for better stability.
  • Do your homework. When selecting private cryptocurrency, view its history. Determine the likeliness of being exploited by criminal enterprises.

Consumers under 50 are more likely to participate in digital currency but they are more vulnerable due to a lack of financial savvy. If this is you, take the time to invest in learning more about both general finances and crypto in particular. Keep an eye out for digital currency trends and the news to protect yourself from throwing in your lot with unsavory characters who use crypto to hide their crimes.

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