Keeping your Cryptocurrency Safe
In recent times, we’ve seen how digital assets like cryptocurrencies have exploded onto the mainstream. Bitcoin being the most popular of cryptos on the market and the literal gold standard for cryptocurrencies has rallied to a record high of $34,000 on the back of stronger demand.
With institutional investors taking larger positions on Bitcoin, it is only a matter of time before other cryptocurrencies are sure to follow suit. Ethereum, Litecoin, and Ripple XRP are just some of the digital assets that investors can choose to snap up.
Understandably, even non-crypto enthusiasts would be keen to begin investing in cryptocurrencies given the amazing rates of return. While this is definitely true, there are many risks associated with these assets.
For starters, the unregulated nature of the crypto market exposes investors to extreme levels of volatility. So volatile in fact that fortunes can be made and lost within just a matter of seconds when investing.
Because of the lack of government oversight, there have been a remarkable number of crypto heists and hacks that have left investors with massive losses and little-to-no legal recourse.
Thus if you intend to invest in cryptocurrencies, here are some good security practices that you’d do well to emulate.
1. Secure your cryptocurrency storage
Cryptocurrencies do not have any tangible physical presence. Thus unlike cash, they cannot be physically stored and locked away.
Instead, hot and cold wallets are used to store your cryptocurrencies. Also known as cryptocurrency wallets, these storage devices come in both physical and digital formats.
Hot wallets are the most common type of storage system for cryptocurrencies. These are essentially an online service that stores your cryptocurrency for easy access.
While convenient, hot wallets are especially vulnerable to attack from hackers looking to exploit security flaws.
As a rule of thumb, store a minimal amount of cryptocurrency within this wallet and only transfer funds to it when absolutely needed.
This brings us to cold wallets. Cold wallets are physical storage devices i.e. a hard disk or thumb drive that stores your cryptocurrency encryption keys offline. Despite being unwieldy, cold wallets are impossible to access when not plugged into a computer or other device.
Additionally, cold wallets can be locked away into a safe for added security when not in use. Be warned, however, that misplacing or damaging your cold wallet will make it impossible to regain access to your rightfully owned cryptocurrencies.
Read more about this here: What is a Cryptocurrency Wallet: 5 Different Types & How They Work.
2. Only work with reputable crypto exchanges
Thanks to advancements in technology and the decentralized nature of cryptocurrencies, it is possible to buy or sell these assets at a variety of exchanges. Recently, even Paypal has allowed users to buy, sell, and store cryptocurrencies on their platform.
All of this freedom does come at a cost, however. Because the crypto industry is left unregulated
The huge sums of money at stake exposes the industry to a significant degree of moral hazard. In fact, there are literally untold millions of dollars’ worth in cryptocurrencies unaccounted for as a result of scammers and hackers.
The Mt. Gox collapse is a very real example of the risks faced by investors in the crypto industry. Heists and constant attacks from hackers resulted in the exchange of hemorrhaging funds and led to its eventual demise – an event that left customers with little to no legal recourse at the end of the day.
3. Practice good security hygiene
Ensuring that you have good security hygiene practices in place is essential to keeping yourself safe from hackers and would-be thieves.
When performing transactions of any kind, always ensure that you operate on a trusted network at all times and never make use of public wifi.
Besides that, regularly update your passwords and never reveal sensitive information to anyone. Using a VPN to protect your data privacy is also another invaluable method of staying safe when performing transactions.
Safety is and always will be the most effective insurance policy. Don’t let criminals and thieves get their hands on your hard-earned cryptocurrency.