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- Feb 28, 2020
In this lesson, I will give you some tips on how to increase your crypto's security.
Security problems are common in any industry, not just in digital currency. Thieves go where money flows.
As the crypto market continues to surge in popularity, hackers will continue to want to cash in.
Fortunately, crypto exchanges are realizing that the industry cannot thrive without proper security and risk management in place to protect the interests and assets of their clients.
So while the industry waits for the IT experts and cryptographer geniuses to develop programs and tech that further enhance crypto’s security and overall functionality, there’s a lot you can do on your own to keep your crypto investment safe from hackers and scams. Now more than ever is the most important time to ensure your crypto’s security.
How to increase your crypto's protection
Here are some of the methods:
1. Use wallets from known sources
Choose an established and regulated crypto exchange with an active community of users. The more known and trusted a crypto exchange, the more likely that they already have better safety mechanisms and risk management solutions than less reputable, startup exchanges.
Look at it from the perspective of choosing a bank to store your fiat currency. You wouldn’t and shouldn’t entrust your hard-earned cash to any building or institution just calling themselves a ‘bank’. Reputation and credibility should be the foundation of your selection process when choosing a wallet to store your coins.
2. Don’t leave your funds on exchanges
Major exchanges have large user bases that in turn attract hordes of hackers.
Although crypto exchanges have safety mechanisms in place and strive to refine their systems to become as hack-proof as possible, exchanges still have a built-in weakness in their design. Crypto exchanges in its core are centralized web applications and are therefore susceptible to the same issues of hacking that torment other web applications on the internet.
The dozens of crypto exchanges that have suffered from breaches in the past two years alone should be enough proof. In conclusion, don’t leave any money on the exchange that you don’t plan on actively trading.
3. Use cold wallets
As long as your wealth is online, then it’s always at risk of getting snatched by thieves. It’s not a question of ‘if’ hackers strike, but ‘when’. Don’t give them the chance to spot any faults on your locks and instead, cut them off completely by using cold wallets.
Cold wallets are offline hardware devices like a hard drive or USB. These devices come with buttons that require the user’s physical confirmation before running any transaction online. You can still store funds on exchanges and hot wallets but only the amount that you are willing to lose.
4. Don’t store all your crypto in one place
As investors say, don’t put all your eggs in one basket. You’ll never know when tragedy will strike, but if you store your crypto across various secure storages then you can minimize the damage to your assets. However, make sure that you create an organized system of keeping track of all of your wallets, or else you might accidentally misplace and even forget one of them all on your own.
5. Always have multiple back-ups of your private keys
In relation to the one above, always have multiple back-ups ready. However, finding a good back-up to store your crypto is slightly tricky. Obviously, you shouldn’t store your crypto in centralized services on the internet such as the cloud. Doing so would defeat the purpose of crypto’s decentralized objective. Additionally, if those services get hacked, you wouldn’t be able to do anything to keep your crypto safe.
A better method would be to keep an offline backup of your private keys and seed phrase in a safe place only you would know. Seed phrases are a string of 24 characters which you can derive your private keys from. To enhance the security of your private key, store your seed phrase across different devices and locations.
6. Use strong passwords
Generate strong passwords you haven’t used anywhere else and make them as unique as possible.
There are random mnemonic generators online you can utilize to generate a completely unique and random password. If you use multiple exchanges, then make sure that each password is different.
If you want to keep your passwords as far away from hackers as possible, then printing it out on a piece of paper, locking it in a safe deposit and removing all traces of it on your computer is the best way to do it. With this method, you should always have more than one backup copy in case those physical copies are lost or destroyed. You should consider making multiple copies and storing them in separate and secure locations.
7. Use secure networks
Never do your business on public networks. When using public Wi-Fi, anyone with the ability will be able to access and monitor your activities on the internet. To ensure that your network isn’t tampered by hackers and the like, the best thing to do is to pay for a reputable and well-reviewed virtual private network or VPN and install it across all of your devices. This will add another layer of protection over your Wi-Fi by encrypting your internet connection.
8. Be aware of scams and frauds
Hacking and breaches aren’t the only security issues posing a risk to your crypto investments. Investors lose hundreds up to millions of their coins every year on scams, frauds and fake ICOs. Always be wary of fake websites and applications. To ensure you always have the correct URL in place, it’s better to bookmark the sites you use for trading. Web extensions that help you spot phishing sites are also readily available for you to download.
Don’t fall for these scammers’ schemes and educate yourself on their different ploys and tricks.
Before you even think about making a transaction with anybody on the internet, make sure that you do your research properly. The simplest rule to remember when someone comes to you with an offer of investing is: if it’s too good to be true, then it is.
9. Don’t make yourself a target
If you dangle an apple in front of a horse, sooner or later it’s going to bite. With the boom of the crypto market, cybercrime is also at an all-time high. Like a predator stalking its prey, hackers are vigilant and actively scouring online hubs in search of their next profitable target. They lurk within the network of crypto influencers and target anyone who declares their income and profit.
In retrospect, you wouldn’t shout out to the streets all the assets you have inside your house, right?
As a general rule of thumb, don’t talk about your investments or gains anywhere on the internet or you risk inviting cybercriminals to your doorstep.
Looking forward to crypto’s future
Offline or online, remember that you are responsible for your own wealth. While some security breaches can happen out of your control, there are various secure risk management strategies and solutions to crypto security problems you can do to minimize damage or avoid it altogether.
Crypto still remains an industry in transition and it will continue to remain this way for more years to come.
Therefore, while it progresses towards its adoption in society, it will continue to face challenges and generate its own solutions. These bumps on the road, however, do not take away from the bright and promising future of crypto once it has evolved into a refined ecosystem.
Our previous lessons about cryptocurrencies can be found here:
Lesson 1: Get to know the coins
Lesson 2: Where to buy and keep cryptocurrencies
Lesson 3: A guide to stablecoins
Waiting for your thoughts and comments.
Trading cryptocurrencies carries a high level of risk, and may not be suitable for all investors. Before deciding to trade cryptocurrency you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose.