Cryptocurrency is a type of digital currency that generally only exists electronically.
A cryptographic digital currency is one in which the key for any particular transaction can be coded into a unique code with no potential for being compromised by anyone other than the person to whom the code belongs.
This doesn’t mean that Bitcoin is perfect. To the contrary, Bitcoin’s flaws have led many companies to issue Bitcoin-based digital currencies, as is the case with Monero (XMR). It also hasn’t been impossible to abuse the platform by using it as a money laundering tool. While there have been no reported cases of Bitcoin being used in money laundering, it is still possible for hackers or criminals to abuse the digital currency.
Two of the major security flaws with Bitcoin came to light as recently as 2014, when it was discovered that attackers could siphon thousands of Bitcoins away in a matter of minutes from the exchanges in Mt. Gox, a leading Bitcoin exchange. The Tokyo District Court held that the defendants involved could have known about the flaw and yet failed to fix it. (Although it is possible that the court’s decision was influenced by a political statement by then-Japanese Prime Minister Koizumi Jun’ichir, who said at the time, “One cannot seriously call it a problem if someone steals Bitcoins.)
Aside from the Mt. Gox breach, the biggest security issue with Bitcoin is that it is subject to various vulnerabilities. As long as the code governing Bitcoin is open and decentralized, it is capable of being exploited, such as the digital currency’s much-debated “block chain,” which effectively removes transaction records and prevents the creation of permanent record of Bitcoin transactions. As I explained in my previous blog on Bitcoin, a full backup of your Bitcoin wallet is always advisable, regardless of the security of your digital currency wallet; however, for those who are new to Bitcoin I always recommend getting advice from an expert (look here for more info). You can also learn about merchant services such as https://www.wecu.com/business-banking/merchant-services/ to know how you can manage cryptocurrency accounts.
The Satoshi Nakamoto white paper provides the most important background for understanding Bitcoin.