Are you ready to take the plunge into the world of cryptocurrencies? If so, it’s important to understand how to properly secure your crypto funds. Self-sovereignty is the cornerstone of cryptocurrencies, meaning users can act as their own banks. With proper security measures in place, you can keep your coins safe and secure.
In this article, we will discuss how to safely store your assets, why cold wallets are better than hot wallets for long-term storage, and what to do if you don’t want to be concerned about your funds.
First, it’s important to know how and where to store your assets. Unlike physical currency, cryptocurrencies are digital and stored on a blockchain, meaning they require digital storage systems known as wallets.
Crypto wallets essentially work like cash wallets in that they allow the holder to receive and transfer funds. However, the main distinction between regular wallets and crypto wallets is that the former use public and private keys for transactions.
A public key is a set of numbers that allows someone to receive Bitcoin or other cryptocurrencies. It is generated when a new wallet is made and is kept in the wallet’s public address. A public key is one that you can share with others so they can send you funds.
This key is also a set of numbers but is different from the public key by purpose. It’s used to prove ownership of crypto wallets and facilitate the transfer of funds. Having a private key is akin to owning the key to your front door — you don’t want any stranger to have it. It is, therefore, essential that your private key remains secure, as any person who gains access to it can take complete control over any assets held in the wallet and move them elsewhere.
Today, most crypto wallets use Hierarchical Deterministic (HD) technology for the secure storage of coins and tokens. HD wallets allow users to store millions of private keys in a single wallet, making it incredibly convenient and versatile. However, you need a “seed phrase” — essentially a collection of words that can be used to get access to all the wallet’s private keys. For example, a seed phrase might look like this: “worker client driver leader member length memory.” Of course, you don’t want to share it with anybody.
Therefore, one of the biggest aims when holding your crypto is to make sure your private keys and seed phrases are secure. What dangers could there be?
Cryptocurrency is an increasingly popular form of currency, but unfortunately, it has become a prime target for scammers. The anonymity and lack of regulation that come with crypto can sometimes make it difficult to spot illegitimate schemes, so be aware. Scams such as Telegram scams, giveaway scams, Uniswap scams, and many other schemes are all common tactics used by criminals to separate investors from their money.
Keeping funds on centralized exchanges
While centralized exchanges are a popular option for many users due to their convenience, it is important to consider that these exchanges are vulnerable to hacks and other malicious activities. Thus, experts often recommend that investors opt for self-custody instead.
Malware is a major security risk when it comes to storing and protecting your seed phrase. Your seed phrase is essentially your key to accessing virtual funds, so if it’s stolen or compromised, you could be in serious trouble. Unfortunately, malicious software can make that a reality without you even noticing until it’s too late.
The loss of your private keys or seed phrase
Losing your private keys or seed phrase can be one of the most devastating mistakes you can make when it comes to managing your crypto assets. Without access to this vital information, you may lose all control over your funds and be unable to fully access or use them.
It’s important to be aware of the dangers of fake crypto apps and websites. They are designed to look like real applications but are actually phishing scams that can get access to your private keys and funds.
Now, let’s explore several essential tips for keeping your crypto safe.
One of the best ways to ensure your wealth is protected from theft and other malicious activity is by using different wallets for different purposes:
Hot wallets are wallets that are constantly connected to the Internet, like smartphones, desktop applications, or even crypto exchange-native wallets. They offer convenience and versatility, but they are exposed to the same risks as any other Internet-connected device.
Hot wallets should be used for day-to-day transactions and for small amounts of crypto that you need quick access to.
For those who want to minimize their risk of online attacks, cold storages provide a safe and secure storage solution. Unlike hot wallets, these do not connect to the Internet and are used to store private keys away from potential hackers. Cold storage wallet may be either hardware or physical, like a piece of paper with your seed phrase and private key written on it.
Cold wallets are perfect for those who want to store big amounts of crypto for the long term.
Remember, it is essential to be vigilant when signing transactions. Fake transactions can deplete your wallet, so it is important to ensure that the transaction is legitimate before signing.
When you are looking to keep your crypto assets safe and secure, make sure you store the seed phrase in a secure manner.
The first way to store your seed phrase is to do so offline. This is the recommended approach as it eliminates the risk of your seed phrase being accessed by an unauthorized third party. If you do not want to use pen and paper, then you can look into engraving your seed phrase.
It is also important to keep in mind that when storing your seed phrase offline, you should keep multiple copies stored in different physical locations. This way, if one copy gets stolen or corrupted, you’ll still have additional backups available.
It is essential to keep in mind your seed phrase must never be given out to anyone, even if they are family members or close friends. Doing so could compromise your security and therefore put your funds at risk.
Also, always double-check the address before sending any crypto assets. Sending crypto to an incorrect address could result in your funds being lost forever, and unfortunately, there is no way to recover them.
Securing your workspace is as important as protecting keys and phrases.
When conducting crypto transactions, it is essential to use a dedicated device that is solely used for these operations. Utilizing the same computer for other activities could increase the risk of hacking. Therefore, multitasking with other applications should be avoided at all costs in order to ensure the safety and security of your funds.
Furthermore, implementing strong login protocols such as two-factor authentication can help significantly reduce the risk of data breaches. However, SMS-based two-factor authentication carries its own risks. SIM-swapping attacks, where hackers take control of a user’s mobile number and use it to access users’ devices, are on the rise. To ensure maximum security, consider two-factor authentication through a dedicated app like Google Authenticator. This will help protect confidential information and provide peace of mind knowing that your data is secure.
Of course, don’t forget to set long and secure passwords.
One more method you should consider is using a VPN. It masks your real IP address with an anonymous one, making it difficult for anyone to trace the transactions back to you. This means that even if someone was able to intercept your internet traffic, they would have no way to tell where the crypto payments were coming from.
To conclude, although there is no way to guarantee absolute security when dealing with digital funds, following a few basic rules will help significantly reduce the risks associated with keeping your crypto safe. If you take the necessary steps to protect yourself, you can ensure that your online money is as secure as possible.