Cryptocurrency & Cybersecurity: How to store your crypto safely?
Date: 10 March 2023
With growing popularity and incredible returns, cryptocurrencies are becoming more and more attractive to the average investor. However, investing in and storing cryptocurrencies is no longer as safe as it was once perceived to be, given the rise in cybercrime on cryptocurrency exchanges and individual wallets.
Only recently, BTC.com lost $3 million worth of crypto belonging both to its customers and the mining pool itself. The crypto exchange, Binance, was earlier hit by an attack in which it lost a whopping $570 million.
Further the FTX crash illustrated that major exchanges are no longer safe places for your crypto. It, therefore, becomes critical to save your cryptocurrency in a protected space where no one can touch it except yourself.
Cyber security is a huge concern for businesses of all natures and sizes, given the massive rise in ransomware attacks and data breach incidents. However, in the case of cryptocurrency exchanges, mining pools and wallets, the risks are that much higher as any breach leads to a direct loss in huge sums of money.
Below, we take a deeper look at the safest ways to store your cryptos safely without fear of them getting stolen.
Difference between trading and investing in cryptos
Before we delve into the safest ways to store your cryptocurrency, let’s look at the fundamental differences between trading and investing in cryptos.
When trading, the approach is different for safely managing your cryptos. It is important to withdraw profits periodically and manage your crypto exposure to exchanges. In case you are interested in crypto trading, you could learn more at the investfox crypto section, with educational articles and broker reviews.
When investing in crypto, however, it becomes critical to save your money on a decentralised wallet that can’t be accessed by third parties, especially exchanges. There are two methods for saving cryptos - Cold storage and hot storage.
Cold storage means saving crypto on flash devices that have no connection to the internet network. They are also known as hardware wallets. This is the safest way to save your crypto, and many companies are selling specialised flash drives to save your private keys.
Hot wallets are software wallets that can be connected to brokerage and other third-party and web3 apps to exchange or send them. Cold wallets are the safest option to hold your crypto, especially for investors who hold considerable amounts of digital assets.
For traders, it is important to flexibly manage their cryptos while maintaining security along the way. Decentralised wallets are a good option for saving your cryptos while having flexibility.
Storing your crypto safely: Dos
- Use a reputable crypto wallet that is decentralised
The best place to find a decentralised, and safe crypto wallet is to search through crypto forums where users are sharing their experiences. But to help you cut this search short, here are names of the most popular cryptocurrency wallets:
Metamask: This is one of most well-known software wallets. It securely stores your cryptos while being always online and accessible in case you need to send or receive cryptocurrency.
Trust Wallet: Another well-known and safe option for saving your crypto in an always available manner.
There are many other software wallets out there, but these two are enough for beginners to feel safe.
Use Cold storage walletsCold wallets are essential if you want to save crypto for long periods of time. Cold wallets are especially critical to investors who hold large assets. For the average investor software wallets are enough, but for investors who hold substantial digital assets cold wallets are a must. There are several options when it comes to cold wallet selection such as:
Ledger nano series are several advanced cold storage drives that come with support for 1500 cryptos.
Trezor - equipped with a touchscreen interface, the Trezor supports over 1000 cryptos.
There are other cold wallets, but these two are among the top manufacturers of cold wallets.
Antivirus and basic anti-hacker protection
Make sure your PC or the device where you are holding your sensitive information is protected from hackers by using security solutions like updated software and antivirus protection.
Hackers are aware that they can not hack blockchain technology itself. They are, then, obviously always working out a way to hack devices where users’ sensitive data is stored. Make sure all software is legit and up-to-date before you start typing your seed phrase and passwords to keep security risks at bay.
Storing your crypto safely: Don'ts
There are several red lines you never want to cross when saving your cryptocurrencies. Making the below mistakes have cost millions of cryptocurrency holders dearly.
- Saving crypto on centralised exchanges
Never save your crypto on centralised exchanges. On central exchanges, the wallets that users are given are in total control of the exchanges themselves, meaning it is simple for them to use your crypto as they will.
Of course, many exchanges are not going to touch user funds but after the FTX crash, it is better to save your crypto on your wallet rather than risk getting caught in the next FTX-level crash.
- Sharing your private keys with others
Never share your private keys with anyone else as it is the primary target for hackers. Make sure to write down seed phrases. Private keys are the most critical part of blockchain and cryptos, and sharing them makes you extremely vulnerable to cyber threats and malicious actors.
- Clicking on email and messenger links that are suspicious
This is part of basic cyber security hygiene. And cyber security best practices are critical for those who invest in cryptocurrency.
Never click on an email link that is coming from an unknown third party. Many times, phishing attackers are trying to seduce their victims by offering well-masked links that contain viruses and other malware. Ask your friends to verify links before sharing them with you. Hackers regularly compromise social networks to spread malware and steal personal data.
This jeopardises not only money stored as cryptocurrency but also your information security at large including your credit card information, personally identifiable information etc.
Cryptos are great for building wealth and investing in tandem with modern trends. However, after the famous FTX crash, it became more apparent that individual users need to be cognizant of their cybersecurity hygiene when trading and investing in digital currencies.
For investors who want to save substantial amounts of money cold wallets are a must, but for the average investor and traders, software wallets like Metamask will do the job. Make sure not to share private keys or seed phrases with anyone else, and use up-to-date software on your computer. Double-check before clicking on any email or messenger link, as they may contain viruses that are out to steal your personal data and ultimately your money.