Digital payments are a very convenient way to do business because they eliminate the need for physical cash. However, most users are worried about potential security issues that can compromise their payments despite the convenience. According to a 2020 survey, 69% of people who make online payments are concerned about the security of their data and funds.
Nonetheless, the same study reveals that people need these payment options despite the potential security problems. Most respondents (79%) use payment platforms at least once a month, with 54% stating convenience as the top reason. For risks, respondents cited hacking (41%), fraud (16%), and theft (12%) as the top three fears they have of interacting with payment platforms. Since online payments are somewhat unavoidable, users must find a way to continue transacting safely.
Blockchain technology is the underlying framework that powers cryptocurrency payments. This technology is popular for many of its fundamental features, some of which improve the security of online payments and guarantee safety. For instance, blockchains store transaction data permanently so that anyone can verify and confirm transactions. This lends increased transparency to crypto payments and reduces the likelihood of data tampering.
Crypto transactions are also very inclusive. Anyone can register with a centralized or decentralized exchange or wallet provider to buy crypto and send or receive funds. Users can also connect their wallets to service providers like e-commerce merchants and crypto casinos. This is advantageous to service providers because it exposes them to a broad range of customers not limited by geographical location.
For instance, at crypto casinos players can simply connect wallets and deposit supported crypto assets to enjoy their favorite games. This is possible at all types of crypto gambling service operations, including a casino not on gamstop, regardless of regulatory restrictions or customer base. Similarly, in the retail industry, crypto payments offer enhanced security for both customers and merchants. When a customer makes a purchase using cryptocurrency, the transaction is secured by blockchain technology, minimizing the risk of fraud and chargebacks. This secure environment not only protects the customer’s financial data but also provides merchants with a more reliable form of payment.
Another advantage of crypto payments is hashing. This is a part of a blockchain’s cryptographic process that converts an input, regardless of length, into an encrypted output. This output is a unique hash that is always the same size regardless of the input. The security of hashes lies in the fact that it is one-way and therefore impossible to reverse-engineer. Furthermore, hashes are used to secure data recorded on the blockchain and make the ledger immutable. Each block header contains the hash from the previous block, another way to ensure the network is tamper-proof.
Cryptocurrencies also help to guarantee security in online payments by ensuring privacy. Although many centralized crypto payment service providers require users to provide know-your-customer (KYC) data before using their services, crypto payments are difficult to track. With traditional payments, it is easy to identify the sender or recipient in a transaction that goes through conventional intermediaries. However, cryptocurrency transactions, especially with decentralized wallets, protect customers by adding an extra layer of privacy. This caters to users who are particular about keeping their personal data private while making online transactions. In a 2022 survey, 70% of respondents said they prefer payment methods that do not share personal data with merchants.
Crypto online payments are not as susceptible to breaches as other types of payments. Nevertheless, users making crypto online payments must be aware of potential risks and take precautions to reduce possible losses. The following are a few simple ways for users to protect themselves:
- Keep Private Keys Safe:
A private key is a secret alphanumeric mix of characters that grants access to a crypto wallet address. This step is crucial for people who use decentralized exchanges since they allow users complete control of their funds by giving them their private keys. However, users of centralized exchanges only have to worry about their passwords and not their private keys.
- Use Two-Factor Authentication (2FA)
This is a basic security precaution used for nearly all types of online accounts. 2FA adds an extra layer of security to a crypto payment by requesting additional verification after inputting a password. The extra verification may be a code sent via SMS or email, or generated using a third-party application.
- Verify Transaction Details
Users must ensure the receiving address or website used for an online payment is correct. Since blockchain transactions are usually irreversible, payers must verify details before confirming a transaction, or risk permanent loss of funds.
- Regular Updates
Wallet providers usually push software updates that contain security patches to protect users from known vulnerabilities. Users must regularly update their software for the best chance against cyber threats. In addition to addressing security issues, updates may improve software functionality and general user experience. Failing to update wallet software exposes users to more risks, as outdated software versions are usually more vulnerable.