The number of publicized hacking events in the crypto world has increased markedly in recent times. The Federal Trade Commission (FTC) recently revealed a 1,000% increase in crypto scam reports between 2021 and the same period in 2022. The median loss for each retail trader was $1,900. This shows that not only are crypto scams on the rise, but they are also frequently successful.
In this light, we have produced this short article to help you better understand how to keep your cryptocurrencies secure. Given the excitement around cryptocurrencies, many new traders have leapt into the unknown and fallen for common crypto scams. Without knowing how to keep their investments secure, they have lost good money, as the FTC’s records show. Whether your crypto wallet contains modest sums, or if it contains vast wealth, as many traders’ wallets do, it is in your interests to keep safety top of mind. What follows is a list of the best ways you can protect your valuable crypto investments.
Best Ways to Secure your Cryptocurrencies
Use a Cold Wallet
In the context of crypto, what is a wallet in the first place? A crypto wallet is an online or offline storage facility that acts like a physical wallet, except it keeps the private keys to your cryptocurrencies safe. A crypto key is a very long number that is used in cryptography. It acts like a password. The bottom line is that whoever is in possession of the keys is in possession of the crypto coins.
For obvious reasons, private keys must be stored safely. Hot wallets are crypto wallets that are connected to the Internet, but these are subject to hacking. In 2019, crypto exchange BITpoint had its hot wallet hacked, which led to the theft of $32 million worth of cryptocurrency from over 50,000 users.
Cold wallets are not connected to the Internet and are, therefore, less likely to be compromised. Cold wallets come in a USB-like device that you can store securely, for example, in a safe. Cold wallets are sometimes called offline wallets or hardware wallets. Using a cold wallet is one of the safest ways to store your private keys.
Use a Secure Internet Connection
Don’t make the mistake of processing crypto transactions over an Internet connection that is not safe. Thankfully, the average person knows better than to make sensitive financial transactions over an unsafe network in an Internet café. The same applies for crypto investing. Public Wi-Fi networks are not safe and can often be exploited by threat actors to gain access to crypto private keys and crypto exchange passwords.
Sometimes, traders make use of office or school Internet connections. After all, most crypto traders pursue their crypto trading careers while holding a full-time job, or during studying. Though most organizations such as these have firewalls and virus protection, such security measures may not be of the required security standard and could still leave yourself exposed. It is best practice to use a VPN for additional security.
Keep Multiple Wallets
Just as you must diversify your investments in general, the same goes for keeping your cryptos safe. Keeping your private keys stored on multiple wallets significantly reduces your chances of suffering a catastrophic loss. It is much more likely for only one of your wallets to be compromised, rather than all of them. It is good advice to use more than one cold wallet for long-term storage, and at least one hot wallet with significantly fewer funds for regular daily transactions.
Strengthen Your Device Safety
Crypto traders can just as easily work from their mobile phone, laptop or desktop. This variety of devices is what makes trading in today’s world so convenient. However, the downside is that it leaves you exposed to cyberattacks. Many people go to the trouble of securing laptops and desktops, but fewer people remember to secure their mobile phone. You should always install antivirus software with the newest virus definitions to protect you from newly discovered vulnerabilities.
Update Your Password Regularly
In this modern age, password management is an important practice. Be sure to implement only the toughest and most complicated passwords possible. Also, change your password regularly. With increasingly powerful password hacking software, it is becoming easier for cyber criminals to steal passwords. Think of your crypto wallet in the same way as you would your Internet banking password. You would not use a password that is easy to guess for your mobile banking app, so you should apply the same importance to your crypto wallet or crypto exchange password.
Be Aware of Phishing
Phishing scams are on the rise, as mentioned repeatedly by the FTC and other financial watchdogs. Phishing is when malicious advertisements and emails entice you to click on a link that exposes you to theft. Spear-phishing is when criminals go one step further and use fake domains impersonating known contacts with which you have had dealings to get you to click malicious links.
In what is now a popular scam in the crypto world and in online trading in general, criminals engineer fake Websites that look like real crypto exchanges but are actually trojan horses designed to steal account information. You should always double check the Web address before you login into your account or enter any of your details.
Be Careful of Entrusting Wallets to Others
Care should be taken when you decide to entrust your crypto wallet to someone else. Some providers offer to take the hassle out of keeping your private keys safe by giving you the option to entrust your wallet to them. This is known as a custodial wallet. It is the opposite of a non-custodial wallet, which is when you oversee keeping your own wallet.
Custodial wallets give you the benefit of having less responsibility for safeguarding your valuable keys, but it is thought to be much more dangerous because you are placing your private keys in the hands of a third party. Granted, this is often a trusted crypto exchange, but even they can be hacked, and, since no crypto exchange is currently compelled to compensate you for lost funds, you are placing yourself at risk. With a non-custodial wallet, you have total control of your private keys and your funds. Some people feel safer with this type of wallet, which can be browser-based or hardware-based.
Backup Your Wallet
You should get into the habit of performing backups of your crypto wallet as often as you can. If you lose your trading device, but you have a trail of regular backups, this may be the only way to recover your currency from a digital wallet. If you lose your private keys, you lose your funds. It is that simple. Depending on the security settings of the wallet, if you unsuccessfully try to guess the signatures, the crypto wallet will lock itself and encrypt its content entirely.
Update Your Software
By now, all traders and anyone with a digital signature of any note knows to keep their software up to date. With crypto, a wallet running on old software can be an easy target for cyber criminals. Each iteration of wallet software contains improved security against known weaknesses. It may be a pain to remember to do this, especially during the thrill of trading, but it is one of the best ways to keep your assets safe and is housekeeping you must carry out.
Use a Multi-Signature Wallet
Multi-signature wallets are gaining popularity. They require the approval of a few people before a wallet can be opened. Multi-signature wallets need at least two signatures, but can be configured to accommodate as many signatures as you need to feel safe. It may be a cumbersome way to access your crypto assets, yet it could save you in the long run.
Cryptocurrency trading has become ever more popular. Unfortunately, the large number of new entrants into the marketplace means there is often room for criminals to take advantage of the uninformed. Be sure to adopt as many of the steps we have mentioned as possible to secure your crypto assets and make sure your trading journey continues a smooth path.
Adrian Ashley is a seasoned business and finance writer. With a corporate career spanning over 20years, he has developed deep experience in such diverse areas as investing, business, finance,technology and macroeconomics. He is passionate about captu...