Most people who own and use bitcoin have not earned their (bitcoin) tokens by mining. Instead of mining, these individuals buy and sell Bitcoin and other digital currencies in one of a number of popular online markets which are known as Bitcoin exchanges. Bitcoin exchanges are completely digital and like any virtual system, they are at risk from hackers, malware, and operational disruptions. If a thief gains access to the hard drive of a Bitcoin owner's computer and steals the private encryption key, he can transfer the stolen Bitcoins to another account. (Users can prevent this only when bitcoins are stored on a computer that is not connected to the Internet or by choosing to use another paper wallet - like by printing Bitcoin private keys and addresses and not keeping them on a computer.) Hackers target Bitcoin exchanges where bitcoins are stored in thousands of accounts and digital wallets. For example, due to a notorious hacking incident in 2014, a Bitcoin exchange in Japan, Mt. Gox had to shut down after millions of dollars of bitcoin were stolen.
We would like to remind you that all Bitcoin transactions are permanent and irreversible and this is a big problem. As with cash money; any transactions made with Bitcoin can only be reversed if the person receiving them returns them. There is no third party or payment processor as in the case of debit or credit cards. Therefore, in case of a problem, there will not be any protection or a supreme authority to refer to.
- CandleFocus Editor
Security Risks of Bitcoin