When discussing security, it is usually a function of how to keep yourself safe against external attacks. That is still true for cryptocurrency security – but you also have to protect against yourself too.
The dynamic way via which cryptos exist means that there is a lot more going for it than fiat currency. Thus, you have to take all the best security and safety tips to mind.
For starters, we look at some of the many risks that you could incur while holding some digital currency.
Risks with Cryptocurrencies
Be aware of the following when you have any amount of coins on you:
1. Hot Wallets Storage
There is nothing bad about going for a hot wallet over a cold storage option, but it is wrong to not know what you are signing up for.
Hot wallet storage means that your account is connected online and is susceptible to online hacks and breaches. You also have to trust the company that you are signing up with since they are the ones with the private keys to the account.
It has happened before that players with malicious intent created a wallet and made away with all the cryptos stored on them.
2. Public Wi-Fi networks
Network encryption plays a huge role in security and privacy.
When you are on a non-encrypted network (like a free/ public Wi-Fi connection), hackers find it easy to look up what you are doing online. This means that they see all the websites you are visiting, the passwords you are entering, and more. Sometimes, they even set up rogue Wi-Fi networks for free to trick users into connecting and stealing their data.
It is also possible to transmit malware to devices connected to the free Wi-Fi network since it lacks encryption. When such happens, the malware can be used to take over user data in different ways.
3. Private Keys
Your private keys are very important for many reasons.
For one, they are the proof that you are who you say you are – and can lay claim to the cryptocurrencies associated with such keys. On the other hand, they make it possible to access your cryptos without ever having to input usernames and passwords. Thus, they are like the master key to any cryptocurrency held on such keys.
A common user mistake with private keys is storing them online. When a hack happens to your cloud accounts, emails, or other online services that you have stored such keys on, the hackers can take all your money.
4. Poor Password Habit
Poor passwords are not only a problem where cryptocurrency accounts are concerned. They are a problem with any accounts that deal with passwords of any kind. Unfortunately, it does not look like password habits are getting better in any way.
For basic online accounts, it is not advisable to use 8-character passwords anymore. This seems to be the basic requirement on most sites which has tricked users into thinking that it is the best, but it is not. Crypto users must be ready to use better passwords that are more difficult to crack than normal.
Total loss is also another risk with bitcoins.
With fiat money, you can speak to a customer care agent and get your funds restored to you. All you have to do is prove to the financial service that you are who you are – and beyond reasonable doubt too. That would not be possible with cryptocurrencies.
You are your own bank, and you are expected to take responsibility here. Before you dismiss this as a once-in-a-blue-moon occurrence, know that about 4 million bitcoins worth billions of dollars are now lost forever. Again, this is only for bitcoin, not counting the other cryptocurrencies on the market.
Protecting Yourself against the Risks
You don’t have to fall victim to any of the risks associated with cryptocurrencies. Looking at the common hacks, threats, and loss models that users can face, we have come up with some tips to keep you better protected and ensure the safety of your funds too.
1. Set Secure Passwords
This is a great place to start.
Never leave anything to chance, especially your password. Resist the urge to set a password containing personally-identifying information just because you can remember that better and faster.
Instead, choose to generate strong and secure passwords online. There is a high chance you cannot remember those passwords offhand too, so you are welcome to choose a secure password manager to do that for you.
2. Enable 2FA
After setting a secure password, make sure you enable two-factor authentication also.
It might sound like such a little thing to do now but the extra layer of security that it gives you is well worth it. While 2FA does not substitute for a good password, it means that a hacker is still locked out of your account even if they were able to get in with the password.
The best thing about 2FA is that you get notified when unauthorized persons are trying to breach your account. The notification is proof that your password has been compromised – so you know well to change it before other attacks are carried out.
4. Secure Network Connections
Now that you know how a poor Wi-Fi network can be used against you, securing your network should be a priority. Fortunately, you don’t have to be a tech guru to get that done.
On your home network, simply install a Virtual Private Network (VPN) to encrypt all of your traffic. If you have a router, you can get a router VPN so that ALL the devices on the network are protected against such hacks and scams. Otherwise, you can install a multi-platform VPN that can be used across each of your devices.
Likewise, stay away from free Wi-Fi networks in their entirety. If you must use them, it must not be without layering such connections over a VPN first.
3. Spoof Security Questions
Someone close to you might know stuff like where you went for your first vacation, the name of your first pet and your mother’s maiden name. Such information is usually what most security questions are set up around. Thus, a person with the same knowledge could use your security question to gain access to your cryptocurrencies and even lock you out of your accounts.
This is why we recommend intentionally lying on your security questions. Pick a question and supply a wrong answer to it. This should be an answer that only you would know; such as swapping out the name of your first uncle for that of your second aunt instead.
Thus, no one else would know the right answer to the security questions since you didn’t pick the obvious options.
5. Choose Wallets Wisely
We recommend that you do a little reading on the difference between a cold and hot wallet to know what is best for you.
They both have their strengths and weaknesses, so we won’t pick one for you. Left to us, though, we will always go for cold storage wallets, especially when a large number of cryptocurrencies are involved.
When you have done your due diligence, make sure to do some additional research on how best to secure your chosen kind of wallet.
6. Keep Private Keys secure
As a rule, your private keys should never be online. This is as undebatable as they come. You should not even take a screenshot of your private keys, seed phrase, recovery phrase, etc.
An entrepreneur and podcaster, Eric Savics, was recently relieved of all his bitcoins when hackers got a hold of his private keys. This theft amounted to about 12 bitcoins, which is worth more than $100,000 at this time.
Write your private keys and sensitive phrases down on a piece of paper and keep it in a cool, dry area. It should be stored away so that just anyone does not come across it. For the best security, hide your private keys in a body of text that only you will understand.
7. Abhor Phishing
When you get a text message from a crypto service you use, asking you to perform certain account operations, you need to be careful.
A link will usually accompany such a message for fast access to your crypto wallet/ service so you can do what was intended. It is better to enter the links manually in your browser rather than following the one from the message.
That way, you can be sure of only accessing the right service and not falling victim to a confidence scam.
8. Use Multiple Accounts
It is a must to have more than one wallet or exchange that you store your cryptocurrencies on. Having been around for some time now, there is a pretty good idea of what wallet providers and exchange services are worth their salt. However, even big companies can get hit unexpectedly – as we have seen in cases of firms like Wirecard.
Having multiple holdings on multiple accounts means that you never have to worry about losing all of your cryptocurrency when a hack or breach happens on any one of the accounts. This way, you are kept safe against the sudden collapse of any one exchange since they are not your sole source of crypto storage. You can be sure of only accessing the right service and not falling victim to a confidence scam.