There’s a lot of debate surrounding Bitcoin, and for good reason. This unregulated electronic currency is not backed by a central bank and its value fluctuates wildly.
The Internal Revenue Service (the US equivalent of HMRC) recently decided to treat Bitcoin as property (not a currency). This could have a major impact on the volume of transactions conducted using Bitcoin.
However, while Bitcoin itself is controversial, the encryption technology behind it could be the future of digital security.
How Bitcoin security works
Bitcoin uses an accepted security concept called asymmetric key encryption. When you download a Bitcoin wallet — in which you store your Bitcoins — you’re assigned two encryption keys.
There’s a public encryption key, which you give to anyone from whom you want to receive Bitcoin payments.
Then there’s a private key. This is mathematically linked to your public key, and is used to decrypt information encrypted with your public key.
In practice, this means anyone who wants to pay you can encrypt the transaction using your public key. But only you can decrypt it to receive the money, because only you have the private key.
Bitcoin encryption for email and the cloud
Some email providers use a similar system called Pretty Good Privacy (PGP) encryption to send emails securely.
However, as PGP stores your private encryption key on an email server, hackers (or the government) could potentially intercept and decrypt your messages.
A more secure option is to encrypt emails using a Bitcoin key before you send them through your provider’s servers.
You can apply this same concept to data stored in the cloud. If you encrypt it with a Bitcoin key, your information will stay safe even if someone hacks into your cloud provider.
The risks of Bitcoin encryption
While these security measures do offer extra protection, the risks of Bitcoin encryption lie in the human element.
If you don't secure your virtual Bitcoin wallet, you can fall victim to theft. Really, keeping your wallet offline and protecting it with a password is the only straightforward way to secure it.
And you should always remember that encryption is a double-edged sword. If you ever lose your password, your data is lost forever.
The future of Bitcoin
While some governments have banned or restricted its use as a currency, Bitcoin is gaining support among some businesses. There’s even a Bitcoin cash machine in East London.
The supply of Bitcoins is limited and their volatility means the cost of security can easily surpass the value of what you’re protecting.
But perhaps the true value of Bitcoin lies in its potential to educate more people about using encryption to secure information.
In this digital age, information is currency. You should protect yours just as you would protect your money.
- How to protect your laptop with encryption
- SSL encryption for your website
- Protecting data on USB drives