The cryptocurrency industry has firmly entered the mainstream over the past few years. The idea behind cryptocurrencies is one of sovereignty, where users can act as their own bank and store and conduct transactions without the involvement of an intermediary. However, self-custody and sovereignty come with the added responsibility of securing your funds in the best manner possible. Ensuring the security of your assets is vital as you navigate the cryptocurrency ecosystem and interact with a host of exchanges, users, and decentralized applications. Just as you would not allow any untrustworthy business to handle your finances, the same concept applies when dealing with exchanges and dApps. So, how to secure your crypto?
The turbulence encountered by the crypto space in 2022, with a spate of protocol collapses and a wave of hacks, is another reminder to secure your cryptocurrency so that your assets are somewhat immune from any risk. Keeping that in mind, this article will look at some of the best practices when securing your crypto.
- As the crypto ecosystem evolves at breakneck speed, so have hacking methods utilized by malicious entities to steal crypto.
- While there are several methods to secure your crypto, one of the best ways to do so is to use a cold wallet.
- It is prudent to keep a majority of your cryptocurrency holdings in cold storage rather than on digital currency exchanges.
- When trading on an exchange, always ensure that you choose a secure exchange and that your trading account is protected using a strong password.
How To Secure Your Crypto
While there are several ways through which you can ensure the security of your assets, it is essential to remember that no way can be considered 100% secure. That being said, let’s jump right in.
Choose A Secure Exchange
There are several exchanges that you can choose from when purchasing crypto. This includes both centralized exchanges and decentralized exchanges.
- Centralized exchange: Ensure you choose a reputed exchange that complies with Know Your Customer (KYC) and Anti Money Laundering (AML) regulations.
- Decentralized exchange: Check for a security audit from a reputable source.
- Peer-to-peer service: Ensure that the service requires KYC for buyers and sellers. It should also offer users an escrow service, and while it is not entirely risk-free, holding funds in escrow would give the buyer and seller added protection.
Securing your Account
Once you have signed up with a cryptocurrency exchange and selected a trading method, ensuring that your account remains secure is vital. This can be done in several ways, similar to practices one might use to secure sensitive information or a bank account.
Use A Strong Password
After creating your account, it is imperative to set a strong password that consists of numbers and special characters. Remembering that your password must not contain personal or verifiable information such as your name or date of birth is also important. A strong password acts as the first line of defense against any malicious entity. You can use the services of a password manager to create a strong and complex password. There are several password managers, such as Dashlane. Additionally, always change your password at regular intervals.
Using two-factor authentication (2FA) along with a strong password is also a robust way of ensuring the security of your account, providing greater protection than SMS authentication. There are several 2FA applications, such as Google Authenticator or Authy, that you can choose from, although you should select the strongest 2FA allowed by the platform you are using. If you must use SMS authentication, you must ensure that a one-time code is sent to your device each time you sign into your trading account.
Keep Your Private Keys Private
You require a wallet with public and private keys when storing your cryptocurrencies. While your public address can be shared with other users, the security of your private keys is another matter. Your private keys must be kept secure at all times and must not be shared with any individual or entity. If you lose access or a third party gains access to your private keys, you could lose all access to your funds. You can secure your keys and, by extension, your account by following the steps listed below.
- Use a random key or passphrase.
- Keep custody of your keys instead of turning them over to a centralized exchange.
- If possible, always use a hardware wallet to store your crypto.
Secure Your Seed Phrase
Your seed phrase is crucial and must be stored in a secure, accessible location. If this phrase falls into the hands of a third party, they can easily import your keys into their wallets and steal your funds. You should keep your seed phrase on a device not connected to the internet.
Hot Wallets Are Out. Cold Wallets Are In
There are two types of wallets, hot and cold wallets. Hot wallets, while offering simplicity and convenience, are often the target of hackers because they are always connected to the internet. On the other hand, a cold wallet, while not as convenient as a hot wallet, offers far greater security and is what experts recommend if you intend to hodl your assets for a significant amount of time. A cold wallet is more secure because it stores your assets offline, keeping them immune from any threats you would have to deal with in the case of a hot wallet. Alternatively, you can adopt a hybrid approach and use hot and cold wallets. This approach lets you store your assets offline when not trading and transfer the necessary funds to the hot wallet when executing a trade.
A VPN Is Never A Bad Idea
When accessing your cryptocurrency or conducting a transaction, using a secure internet connection is important. You must never access your account or conduct a trade over a public WiFi network. Even when using a secure home network, it is advisable to use a VPN for added security. A VPN helps to keep browsing activity hidden from any malicious entity or potential hacker. It is also advisable to keep your device up-to-date with the latest security patches. Additionally, always check the URL you visit, and never click on any malicious link or website.
Don’t Brag Or Make Yourself A Target
A little subtlety goes a long way. Don’t discuss your cryptocurrency holdings with any individual or brag about it. Hackers can also pose as tech support, banking agents, or representatives of the exchange you use and try to pressure you for your account details.
Before investing, it is vital to thoroughly research the asset you intend to invest in, its uses, and its functionality. Every credible cryptocurrency will have a whitepaper that will help you better understand the asset and its potential. If no whitepaper or website is available, avoiding such a token is best.
Proof Of Reserves
Due to the bankruptcy of numerous projects, and the spectacular collapse of the FTX, users have started to realize the importance of transparency in the crypto ecosystem. As a result, users are calling for better transparency in the form of proof of reserves. Before investing in any crypto exchange, ensure the exchange has proof of reserves available in the public domain.
Keep An Eye Out For Scams
2022 was one of the worst years regarding scams and hacks in the crypto ecosystem. As an investor, you must keep your eyes and ears open for any potential fraud to avoid them. Some of the most prominent scams are fake investments, crypto pump-and-dump schemes, phishing scams, and fake cryptocurrency exchanges. There is also the ever-present risk of hackers.
How To Secure Crypto: In Closing
The points mentioned above are the basic methods you, as an investor, could employ to ensure a smooth experience in the crypto ecosystem. The space is constantly evolving, and it is crucial to stay ahead of the curve to ensure the safety of your assets. If you are starting your crypto journey, one of the best places to get started is CoinSmart.
CoinSmart is registered as a Securities Dealer and a Marketplace with the Canadian Securities Administrators (CSA) and complies with applicable regulations, including the obligation to segregate users’ funds and to hold these funds with authorized independent third-party Custodians. In other words, CoinSmart users can rest assured that their funds and crypto assets are managed in accordance with strict regulations.
CoinSmart provides users with a seamless and easy-to-use interface, ideal for beginners, while also offering complex trade services for experienced heads. You can also learn more about the crypto ecosystem through our GetSmart hub.
Disclaimer: The content of this email is strictly for information purposes only. All of the opinions expressed in this email are not connected to CoinSmart and are not intended to provide you with investment advice. It is important that you do your personal research and/or consult an investment advisor to determine what is right for you.