Breaking into the crypto niche also involves a certain level of financial responsibility. In addition to correct risk management when investing, another key factor is to use a secure scheme to protect your funds if you decide to store them in a digital cryptocurrency wallet. Regardless of the wallet chosen, there are standardized good practices to protect your cryptocurrencies and stay one step ahead of hackers. Learn 5 practical tips here!
If you use an exchange: Triple the security of your account
Cryptocurrency exchanges or platforms are one of the most common places for users to store their digital currencies. They are an ideal arena to have the funds at your fingertips whenever you want to execute buy / sell transactions, and even trade with platforms compatible with futures contracts or CFDs.
The wallets used by these types of platforms are called “hot storage wallets”. These are constantly connected to the Internet and therefore more vulnerable to cyber-attacks.
Evolution in the industry has allowed exchanges to become increasingly robust; however, there are cases of massive thefts that have become the epitaph of many popular platforms such as Mt. Gox and QuadrigaCX. So how can you protect yourself from these massive cryptocurrency hacks?
If you use exchanges, here are some key tips:
- Avoid the use of repeated passwords on different platforms at all costs: A very common mistake is to use the same password for your social networks, emails, trading platforms and other online services. Avoid it, because if there is a breach in any of them, the rest are put at risk!
- Phishing: Phishing is one of the most common techniques for hackers to get hold of your personal data. Whenever you visit a website, check the URL, the SSL certificate and make sure there are no errors. There are add-ons for browsers and online services, such as isPhishing, that allow you to check the veracity of a website if you still have questions.
- Two-factor verification: If available, feel free to configure this option. This adds an additional layer of security to your account and will prevent someone from accessing your account without being privy to this dynamic code.
Long term or large amounts: Move your funds to a hardware wallet
Many investors have bet on the game with a long-term strategy, and have gained impressive results. A Fortune article published in the midst of a bullish euphoria in December 2017 shows the most proud face of this hypothesis: an investment of $100 in Bitcoin made in July 2010 would have been worth more than $28 million by the date of the article’s publication.
Although the market is yet to experience a similar occurrence, many expect their assets to gain long-term value. If this is your case – or if you have a larger investment – the ideal option would be a hardware wallet or a custody service like Coinbase Custody.
The two leaders in the cold wallet sector are TREZOR and Ledger, and their wallets have very robust security features that make their devices a kind of small safe.
Metacert: A classic MEW ally
If you are a “crypto evangelist” and have tracked the vast Ethereum ecosystem, chances are good that you have heard of MyEtherWallet (MEW) and Metacert, two popular Ethereum wallets. The first is a very versatile and useful online wallet not only for storing ethers, but also compatible with ERC20 tokens, even those that are just in the fundraising stage.
Its popularity index soared between 2017 and 2018 with the fever of Initial Coin Offerings or ICOs. The wallet is used to recommend the services of Metacert – a cybersecurity company specializing in detecting phishing schemes or malware or ransomware attacks.
Many use their free plugins to avoid falling for these scams. In 2019, the company helped prevent an attacker from using DNS cache poisoning (DNS Spoofing) to intercept a transaction on ethers.
Public keys, private keys and seeds
It is important to know what the difference is between keys to avoid beginner mistakes. The premise is simple: never share your private keys or seeds with any other individual or service!
A typical scam in the cryptocurrency industry is to promise profits by sharing this personal data.
The private key constitutes a unique element of asymmetric cryptography and serves to access your funds and sign transactions on the blockchain of a specific cryptocurrency. If someone gets hold of it, they will have full and unrestricted access to your funds.
Meanwhile, seed is a unique combination of words that some wallets often use as secondary backup in case a user loses access to their private key.
Finally, the public key, as its name indicates, is the element that you can share with other individuals, since it is your identifier in the network to receive funds and is analogous to a bank account number.
Another practical tip: don’t send funds to users who promise to send them back to you multiplied, it’s a common scam!
Are you a trader? A broker may be more suited to your needs
If your investor modality consists of trading with popular cryptocurrencies, a regulated broker could be a better alternative. These brokerage platforms offer more advanced security features and often provide consumer funds protection through recognized agencies.
Here, instead of storing your cryptocurrencies in wallets, you will trade on financial derivatives that move according to the price changes of its underlying asset (the cryptocurrency). It is a more versatile and secure method, since —in general— funds can only be withdrawn to an account that is owned by the user.
Other brokers like eToro go a step further and offer the conversion of CFDs to real cryptocurrencies. This broker uses the eToro Wallet tool, opening the doors to the best of both financial worlds.