Secured Cryptocurrencies – 7 Tips for a Better Sleep
Blockchain-based technologies and cryptocurrencies as such promise you maximum security. But over the last few years, I’ve read hundreds of reports about investors who have lost their crypto savings for various reasons. Whether it’s improper private key retention, stock market hacking or phishing, there are plenty of ways to turn from a rich man to a pauper in minutes. If you have bought some bitcoin or ethereum, I wrote down my tips on how to protect them.
Your cryptocurrency is only as secure as your wallet
With cryptocurrencies, you’re your own bank. The main disadvantage of this fact is that once digital money leaves your wallet, there’s no way to return it. There’s no insurance or phone support that can help you. That’s why it’s important to do everything possible to secure your cryptocurrencies.
In general, you should only use cryptocurrency wallets developed by reputable companies. There are two basic types of wallets:
- Hot wallets – they’re connected to the Internet and used to store money for everyday use (e.g. I have my crypto portfolio without physical holding on a (for me) user-friendly eToro platform).
- Cold wallets – they are not connected to the Internet, and they have never been, and thus, of course, they are safer. It’s therefore worth depositing your savings on them. You can choose from:
- paper wallets – you print a private and public key on paper and hide it,
- brain wallets – a wallet like Armory or MyCelium will generate a phrase that you need to remember to get to your crypto money,
- hardware wallets – a wallet in the form of a very durable physical device visually similar to a USB (the most famous include Ledger, Trezor – developed by experts from SatoshiLabs in the neighbouring Czech Republic – or SafePal) protected by a pin, two-factor authentication, biometric data as well as double cloning (you have two wallets if something happens to one of them).
Surely you immediately said to yourself that paper or “brain” wallets are not among the safest ones, so if you have a little pile saved, just put it on the hardware. At the same time, don’t forget about other safety rules:
- As in the case of investment, divided assets are safer assets. So never have all your cryptocurrencies in one, hot or cold, wallet. Also, don’t forget to pay attention to your cryptocurrency – with small cryptocurrency balances and rising fees for wallets or transactions, you can easily find out that you are actually in the red. Once in a while, it’s good to do a balance consolidation (UTXO = unspent transaction output – this is nicely described, for example, by alza).
- Protect your computer and mobile phone – don’t connect to public wifi, turn on two-factor authentication, safeguard device access with a proper password and never use your browser’s automatic password storage for crypto wallets. If you really want maximum security, for example, if you plan to trade cryptocurrencies actively, then consider buying a separate computer to work with them. It shouldn’t contain any other apps, because each represents a potential hole.
- Store all keys, including their backups, offline so that hackers can’t access them. It’s ideal to have backups hidden outside the house – in case of a fire or other disasters. The recommended place, for example, is your bank’s vault.
- Don’t give in to phishing. Check the integrity of the pages you visit, check two or three times whether you’re downloading a truly secure app and be very careful when it comes to any new software associated with cryptocurrencies. At the end of 2020, one unfortunate person downloaded an app similar to the Exodus crypto wallet to his mobile phone and got $80,000 poorer in two minutes. You can read his very enlightening story on the CryptoPotato website.
- Check ten times to see if you’re sending cryptocurrencies to the right address. There are programs that can take advantage of the copy-paste feature on your computer and cause you to insert the attacker’s address instead of the copied one (you can read about how this clipboard hacking works here). In addition to a proper antivirus, you can also protect yourself by splitting your payment into 2 – first sending a micropayment, verifying that it came through correctly, and then the remaining amount.
- Don’t leave large amounts on the exchanges – even if there are many that are verified or even insured, a hacker attack on them is never excluded. Singapore’s KuCoin Exchange lost 150 million. When you invest, do so sensibly, in verified currencies (I personally believe in bitcoin, ethereum and I give a chance to cardan) with long-term goals, not the vision of quick profit.
- Don’t brag. If you post on Facebook how great you are with cryptocurrencies and how much you have already earned, it may attract unwanted attention. And if there’s a really smart, determined hacker, even multi-factor authentication or a good antivirus won’t save you.