The sad reality is that cryptocurrency scams are not only becoming more widespread, but they’re also more effective. Since 2021 alone, over $1 billion worth of cryptocurrency has been stolen via malicious behaviour worldwide. Whether hackers, scammers or exchange breaches, it’s crucial to know the online threats lurking in the shadows for all crypto investors.
After all, cryptocurrencies are, at heart, lines of intricate codes on a server. Because most crypto assets are inherently digital, those who invest in them require more technical knowledge than those investing in physical assets like gold or antiques. But don’t worry, it’s that technical knowledge that we’ll teach you today.
From the best place to safely buy cryptocurrency to the most watertight and secure places to store it, this guide will teach you everything you need to know about keeping your hard-earned cryptocurrency safe in a dangerous world.
Before we begin, we have a responsibility to bring your attention to the risks involved in cryptocurrency trading. The world of digital currencies can be an equally rewarding but volatile space. Do not be lured by the promise of fast profits, as the price of crypto can rise and fall at a moment’s notice. Always do your research and consult a licensed financial professional before investing. This article is not investment advice.
The Most Crucial Advice: Using a Secure Crypto Platform
Before discussing the fundamentals of crypto security, we need to start with the foundation of any secure crypto investment journey: Using a safe, reliable crypto exchange or platform.
As demand for crypto reaches an all-time high, the number of exchanges and platforms popping up to cater for demand is unprecedented. But sadly, there are many bad apples amongst these newcomers.
Anybody who wants to start a crypto journey that doesn’t end in tears should do so through an exchange or platform that has established a positive global reputation for providing a safe, secure, and beginner-friendly environment for traders. Some examples are Coinbase and Bitcoin Profit.
Cold Storage and Hot Wallets: What’s the Difference?
Terms you’ll often come across on crypto security are cold storage and hot wallets. It’s widely accepted throughout the crypto space that any investor who owns more digital currency than they’d be comfortable carrying on the street in person if it was fiat money should store it in cold storage.
Put simply; cold storage is a device, often a specialist USB drive known as a hardware wallet, that is disconnected from the internet to cut off the lifeline of online hackers. These hardware wallets usually run between $100 and $200. Although they add some extra technicality to crypto transactions, keeping your crypto safe can be a worthwhile investment.
In contrast to hardware wallets, software wallets are often low-cost or free, these are considered more convenient but drastically less secure than a hardware wallet. Let’s look into them next.
Software Wallets
In general, the main role of a crypto wallet is to securely store both the public and private keys you need to carry out transactions on the blockchain. In addition, some have the ability for users to swap their cryptos inside the wallet’s software conveniently.
Overall, software wallets come in three main categories: desktop, online and mobile, and each variant provides crypto investors with a unique array of convenience and security.
Mobile app wallets
First up are mobile app wallets. These give crypto owners the unique ability to pay for day-to-day transactions using a cryptocurrency of their choice. However, remember that this type of wallet stores the encryption keys on your mobile. If you lose it, you might as well say goodbye to your crypto. Thought it was bad to lose your phone? Well, imagine how it would be with all of your crypto investments inside.
Desktop wallets
Next are software wallets that crypto investors install on their desktops. This type of crypto wallet is very convenient, but as it’s connected to the internet, it comes with a risk. If your computer is hacked via a malware attack and your hard drive is compromised, your desktop wallet can be under serious threat. So always ensure you safeguard the private keys to your desktop wallet and keep them in a safe, secure, and secret place.
Online wallets
And last but not least are online wallets. Usually created, hosted, and controlled by individual crypto exchanges, they are generally hosted on servers. Accessible from any device with an internet connection, they are extremely convenient. The downside is that the private keys to this type of wallet are known to the owners of the website or exchange. This means you’re entrusting your investment to the company overseeing your wallet. It’s worth remembering that, technically, they can take your coins.
Avoid using exchange default wallets
Newcomers to crypto who know what they’re doing will buy crypto from a trustworthy platform.
Even if such platforms are inherently trustworthy, no online space is safe from hackers. As these sites process combined millions of dollars worth of crypto transactions daily, they present a very lucrative target for malicious online users.
For example, in 2014, Mt. Gox lost almost 750,000 Bitcoins its users had invested in; in 2017, NiceHash lost over $60 million in an online robbery. These examples demonstrate the risks you can face when leaving your coins in the online wallet of your chosen crypto service, platform, or exchange.
Conclusion: Crypto Security Fundamentals
From choosing the right exchange to introducing you to the world of crypto wallets, this guide has outlined the fundamentals of crypto security that any new or experienced digital currency investor needs to know.
To round off, we will share some additional tips crucial for any crypto investor to know to stay safe in an increasingly dangerous online world. Such as:
- Always be cautious when using any device that can connect to the internet. Use an offline hardware wallet whenever you can.
- Use an immensely strong password to encrypt any cryptocurrency wallet you use, write it down offline, and store it in a safe place.
- Ensure you make regular backups of your wallets and store them in different places.
- Unless you completely trust them, don’t share your private wallet keys or passwords with anybody.
- Above all, if something seems too good to be true, it most likely is. Stay alert.