Risk Involved in Sending Money with Cryptocurrency
Even though high turbulence in value is the highest risk in dealing with cryptos, there are other forms of risk involved in sending money with this cryptocurrency. There is a requirement of verifying the wallet accounts of the sender and receiver of these digital currencies. The normal procedure of verifying and registering is done by manual address typing and QR code scanning. Each wallet has a digital key that is used as and performs the functions of a normal key that is used to open a vault or so. To send and receive funds, these keys need to be shared. This has a risky process. It is like giving a normal key to someone else.
The digital key performs like a bank account number in a digital currency wallet and transfer of currencies.
Types of Keys in Crypto Wallet System
There are two types of digital keys in the crypto wallet system. A Public Key and a Private Key. As the name says, public keys can be shared with others with minimal risk involvement. A private key on the other hand has a greater amount of risk. Sharing a private key is like sharing the account admin access. The receiver can access the currencies inside the wallet.
The public key comes into the picture when there is a fund receiving process. These types of keys are used to share with senders to send money. The risk is lower. The public key cannot be used to access the wallet details fully. The security and safety of the wallet will not have a threat with the public key. Giving a public key is like giving a bank account number to a third party.
Sharing a private key has a higher risk. A private is having greater importance than a public key. A person having a private key can access the full details of the wallet including the count of currency in it. One can access full control of the account with a shared Private Key. In a crypto blockchain, a private key is used to withdraw the coins. In other words, sharing a Private key is giving the username and password of your bank account to a third party. So, sharing private keys with a third party has a hacking risk.
Another risk in sending money is high loss. Cryptocurrencies are very much turbulent in nature. The ups and downs of value happen in a fraction of a second. At times we may get benefitted. There is an equal chance of losing funds also. While sending, the sender will send a fixed amount and the receiver may get a higher amount due to a slight upward change in currency value. The opposite thing may also happen. Normally, the devaluation happens in a higher amount, and an increase in value happens at a slow pace. It is also called volatility risk.
Uneven Exchange Rate Loss. When sending a smaller quantity of digital currency, service charges or exchange charges are comparatively higher. A bigger amount has lower transfer expenses.
Acceptability by Local Government. Also, one of the main problems in Digital Currency is the approval from financial regulators of the country. Not all countries are supporting transactions of cryptocurrencies. Few countries are in a neutral situation – they neither support nor oppose. Many traditional fund transfers are scared to involve in cryptocurrencies.
