Best Practices to Secure Your Cryptocurrency

Best Practices to Secure Your Cryptocurrency

Reading time: 7 minutes

Is Cryptocurrency safe? 

Forbes reported that 50 crypto attacks have occurred this year alone, costing a total of US$430 million. 

Cryptocurrency offers opportunities, but clearly, it also has disadvantages, such as hackers, scammers, and phishing attempts. There are plenty of ways that your crypto wallet/account can be vulnerable to these malicious threats, including some of the following:

• Phishing: Someone tricks you into letting them into your device. Think of it as fishing, but you are the fish, whereas the bait is usually a website or email that looks 'safe'.
• Malware: Malicious software designed to harm or exploit any vulnerabilities in your system.
• Scams: All the creative ways bad actors try to trick you out of your crypto assets.
• Cyberattacks: Direct attacks to steal data or digital money by exploiting security weaknesses.

What Can Be Done to Help Secure Your Crypto?

Use Strong Passwords –

Strong passwords are your first line of defence. And we're not talking about your pet's name followed by ‘123’. We mean strong passwords – a random mix of letters, numbers, and symbols. Think of them as garlic to cybercriminals: the stronger they are, the less they'll like them.

Consider a password manager to manage your passwords. With everything requiring passwords these days, it's likely you're not able to remember some of them. A password manager not only stores passwords but also generates impenetrable passwords for you.

Enable Two-Factor Authentication (2FA) –

Two-factor authentication adds an extra layer of security. Most applications on your mobile device now offer this option. Even if someone manages to breach through the first layer of security, there's another layer to go through.

Hot or Cold?

You can protect your crypto funds using hot or cold wallets.

Hot wallets are connected to the internet. They are easy to use and accessible, ideal for trading on crypto exchanges and transactions. Since they are constantly online, hackers, scams, and other security threats are more likely to target them.

When you keep your cryptocurrency offline, you have a cold wallet. People who want to steal your digital goods can't access them because it's like having a real safe. There are two types of cold wallets: hardware wallets and paper wallets. Hardware wallets store your private keys offline, while paper wallets are just pieces of paper with your secret keys written on them. It's easy, and it works.

Regular Maintenance Is Key

Keep your wallet software and all related applications up to date.  Most of the time, these software changes come with patches that fix newly found security holes. When transacting cryptocurrency, you should always use a private, safe Wi-Fi network if you can. Public Wi-Fi is a great place for hackers to get your information.

Advanced Security Measures

Multi-Signature and Non-Custodial Options –

Multi-signature technology is a high-tech security system that requires approval from multiple people before a transaction can be made. This method works especially well for businesses or groups that need to monitor funds' movement closely. Securing multiple approval points greatly lowers the chance of a single point of failure. Even if someone gets hold of one key, they still can't get to the cryptocurrency without more permissions.

Non-Custodial vs Custodial Wallets

• Non-Custodial Wallets: You hold the keys; you own the control. It’s like having the only set of keys to your car. Since no third party is involved, your financial actions and details remain private, which reduces the risk of external breaches or mishandling by the wallet provider. However, You must handle all security measures, including backup and recovery phase management. Losing your private keys means losing access to your funds.
• Custodial Wallets: A third party controls your keys. They are easier to use, but you trust someone else with your assets. The downside is that the third party controls your private keys and, by extension, your funds. If the third party’s security is compromised, your assets are at risk.

Educate Yourself on Phishing and Scams

Stay updated about common phishing techniques and scams in the crypto space. The best way to fight them is to recognise them. Be sceptical of social media. Not everyone tweeting about Bitcoin giveaways is your friend. If it sounds too good to be true, it probably is.

FAQs:

1. What is the best way to keep cryptocurrency?

Use cold wallets. They don't like the internet, and it comes in different forms, such as hardware wallets and paper wallets. Hardware wallets like Trezor or Ledger are a popular choice due to their security and ease of use.

2. How often should my wallet software be updated?

Whenever you can. Often, these software changes come with security patches that fix security holes that hackers can use. You should always make sure your software is up to date before you start sending or receiving cryptocurrency. Once a month is a good time to check for changes.

3. Is two-factor authentication necessary?

Yes. When you use two-factor identification (2FA), your cryptocurrency wallet is even safer. Someone could get your password, but they would still need the second factor, which is usually a code created on your phone, to access your money. It's an easy step that improves wallet security.

4. What are the risks of using custodial wallets?

You don't have full control of your crypto assets. If the wallet provider has a security breach or does something bad, your digital assets could be at risk. On the plus side, they are useful, especially for beginners.

5. How can I protect myself from phishing scams?

Always be sceptical of unsolicited requests for your sensitive information. Verify the authenticity of emails or messages that ask for private keys or login details. A good tip is to use a VPN when accessing your crypto wallet from a public or unfamiliar network and never click on links or attachments from unknown sources.