You’ve probably heard of blockchains and crypto-currencies and initially the information can seem a little overwhelming, but it really is not as complicated as it sounds.
A Small Word On Bitcoin Wallets
To use bitcoins online, you first must purchase bitcoins – either by bank transfer, purchase on an exchange or credit card. Once purchased, the bitcoins will sit in your bitcoin wallet, which is effectively an online account.
You can then transfer bitcoins to bitcasino (or any company accepting payment in bitcoin) by logging into your bitcoin wallet online, entering the recipient’s address and the amount of bitcoin to send. Once you send bitcoin through the wallet, the recipient will receive your funds usually within 60 seconds.
Why is Bitcoin Secure
The main reason why bitcoin is so secure, compared to regular currencies, is because it is a “push” system, not a “pull” system.
Let’s say you purchase a toy online through an ecommerce site. In this situation, you provide your credit card details and the purchase price is pulled from your credit card account. On top of this, you are providing identifying information with your credit card to many different merchants and all that information is databased and subject to being hacked at some point in the future.
With bitcoin, you are provided with an address to send funds to. It looks like a random mix of letters and numbers, and virtually all people accepting bitcoin will also provide a QR code for convenience which provides the address. You then log into your secure bitcoin wallet and effectively “push” the funds to that address. No identifying information about you is transmitted with the payment.
The end result is that you are sending money and completing a transaction without providing bank account details or credit card details to a third party.
In other words, your bitcoin wallet combined with the “push” nature of transferring bitcoin provides an effective security barrier between your personal bank accounts and the recipient.
Notice how, by design, there is no way for a merchant and recipient of payment to draw further money from your account bitcoin account because they cannot “pull” money from your wallet. The only way a merchant can obtain further bitcoins from you is if you log into your wallet and actively “push” funds to them.
This places you in full control of your funds – the highest level of security possible today.
Consider this in the context of online gambling. Almost all online gambling companies are based offshore and beyond the reach of Australian authorities. Yet, many Australians take the biggest gamble of all online: they give their credit card details to a company based overseas that they know nothing about.
When they win and want to withdraw, most online casinos will request identifying information of the highest level, such as scans of your passport, drivers license and utility bill.
In fairness, most online casinos do operate with a reasonable degree of care and honour payout requests and process credit card payments. Nevertheless, you are exchanging an enormous amount of private information to a offshore company and you have no idea or guarantees regarding their data retention and security policies. In other words, your scanned copies of passports and utility bills could be sitting on an unsecured hard drive which could either be hacked from outside or stolen from within by an unscrupulous employee.
To summarise, using your credit card directly with online gambling companies opens you up to:
- Credit card fraud: drawing money from your account that you did not authorise. As mentioned above, if they have stored your details, they can ‘pull’ money without your authority – either by technical error or deliberately. While most credit card companies will perform chargebacks if you identify unauthorised transactions, you may have some convincing to do if you regularly transact with the online casino. Furthermore, a smarter operator may try to sneak in additional transaction when you are repeatedly depositing and can go undetected. If you make nine $50 deposits in one night and ten were charged to your credit card, what are the chances that you will notice?
- Identity fraud: As mentioned above, you are providing documentation to an online casino which shows your full name, address, date of birth, drivers license number…. all the things one would need to steal your identity or defraud you in some way using personal information.
Neither of these dangers are posed by gambling online with bitcoin.
You can feel secure with bitcasino in three ways:
- Bitcasino cannot pull money from your wallet. You can only push money to them.
- Personal identifying information is not submitted with your bitcoin transactions.
- Bitcasino does not require you to send personal information to either deposit or withdraw.
In effect, your bitcoin wallet is acts as a security barrier between your bank accounts, credit cards and the ultimate recipient.
A final note: Bitcoin is a decentralised system by design – and it’s decentralised in more ways that one. First, there is no central bank. Second, and connected with the first, there is no centralised system that holds all the details and funds for all the accounts. Instead, each wallet is encrypted and protected by the wallet owner’s private key. There are many sources on the internet which provide further details about how this works in detail, but the main point is this: if someone wanted to hack and steal bitcoins from multiple users, they would literally need to hack everyone’s wallet individually, which is virtually impossible. On the other hand, a bank stores all accounts and balances in a centralised system and should that ever be compromised, the hacker would have access to thousands or even millions of account balances through that single point of security failure.
This is why bitcoin has the startup and fintech industries so excited: it heralds a new era of digital security that is simple and fraud proof by design.