Crypto allows users to transfer value faster, easier, and more private compared to existing tender. It’s money just like the dollar and euro, only it’s not owned by a government or in fact any individual, organization, or business. Such great features create the call for advanced security over digital assets. Given that cryptocurrencies are digital assets, individuals and groups can face theft from hackers and malware viruses, and it is your responsibility to adopt practices to safeguard your money. Before converting any dollar amount into the many existing cryptocurrencies, there are several security tips to consider.
For starters, investing in a paper wallet or notebook to hand-write your private and public keys and putting it somewhere secure is a good way to make sure you don’t lose access to your wallet. Generating a new wallet on, say, the Bitcoin ledger is pretty easy. You don’t have to download a software wallet onto your desktop or mobile device to generate a wallet.
There are some sites that allow you to randomly generate a private and public key which you can print out on a piece of paper. This is called a paper wallet and is also not connected to the internet like a downloaded software wallet would be. This means that the paper wallet can’t be hacked, and to access it, you would have to input the public key onto a blockchain explorer of whichever coin it is generated from.
The downside is that a paper wallet acts as a bond of sorts, whoever holds the piece of paper owns it. It can also be destroyed or lost in a fire or if misplaced. While this is a fairly easy way to secure crypto, it doesn’t make it very easy to use as money on the spot.
Storing On Exchanges
Keeping your digital assets on an online exchange is one of the best ways to unsafely store your crypto. Exchanges have been repeatedly hacked over the years, and while they are getting more and more secure, keeping your crypto on an exchange means you don’t own your private keys. If you don’t own the private key, you don’t own the crypto. If thieves and hackers gain access to your wallet and steal your private encryption keys, the thief could transfer the your crypto to another account.
In 2014, a bitcoin exchange Mt. Gox, operating out of Japan, was forced to close down after millions of dollars’ worth of bitcoins were stolen. This was the first of a string of major hacks. The way to safeguard from this is to immediately transfer your coins to your secure wallet after purchase. Unless you are a day or swing trader, there is no good reason to keep crypto on exchanges. Remember: If you do not hold the private keys you do not own your crypto.
If you’re one to not carry large amounts of cash in your personal wallet then you should treat software wallets the same. It’s good practice to carry only small amounts for everyday uses on your mobile device or computer with the addition of two-factor authentication. The rest of your funds should be stored in a safer environment; such as hardware wallets.
As mentioned in our previous blog post, offline wallets, also known as cold wallets, provide the highest level of security. Combining offline wallets with backups and encryptions puts you ahead of digital hackers and gives you peace of mind knowing your assets are safe and secure.
Read about the different types of wallets on our last Keyream blog post here: https://www.keyream.com/blogs/learn-about-crypto/digital-vs-hardware-where-to-store-your-crypto