News about how cryptocurrency users lose, if not often, their savings still appears in the media. Most incidents are related to cryptocurrency exchanges getting hacked. As cryptocurrencies are a hot topic today, media outlets are ecstatic over such newsbreaks. However, such stories may be viewed from a different angle — as another reminder that even with such a high level of protection, one should not neglect security.
To address this question, we have decided to give five relatively simple but very important tips on how to keep your cryptocurrency savings safe.
1. Observe Basic Security Principles
These tips are just about as simple as those applicable to the use of any online service that requires uploading and storage of personal data, albeit with slight adjustments for the peculiar features of the technology.
1. Don’t use simple passwords. A perfect password should contain more than 8 characters, upper and lower case letters, numbers, and special symbols, such as brackets and underscores. Better still if the password has no meaning, being neither word nor a phrase. Should this be the case, it will be even more difficult to crack.
2. Switch on two-factor authentication via email, SMS, or push notifications in the app.
3. Make sure your login, password, and seed phrase (it is used to recover access to your wallet) are safe and inaccessible. Write them down on paper so as not to forget and try not to lose this record, as, for example, Stephen Thomas did. This US programmer has lost a password to a secure flash drive with the keys to a wallet with 7002 bitcoins.
4. Update software wallets on time and very carefully, since in updates, manufacturers usually quickly fix discovered vulnerabilities.
5. If the service that holds your savings allows it, write down the trusted IP addresses to restrict access from unauthorized devices.
2. Don’t Neglect Two-Factor Authentication
Once again, we emphasize the importance of two-factor authentication — an additional code sent via SMS or email channels when logging into the system. Perhaps, with regular use, it may seem like it only causes inconvenience, but if the system is hacked, this could literally save all your funds. Even if a hacker gets hold of your username and password, they will not be able to get into your personal area, and you will immediately receive a notification that someone is trying to log into your account and you will be able to quickly respond to a hacking attempt.
3. Protect Personal Data
Personal data is now worth its weight in gold and, perhaps, it is even more valuable. Therefore, its safety should be taken quite seriously. In the case of cryptocurrency, specialists give the following two important recommendations:
· Use a separate phone number and email address, which are not used in any other resource. This will allow you to maintain access to your wallet or crypto exchange if your account is hacked on another website. The usable phone should belong to you personally, so you can recover your SIM card.
· Don’t disclose your personal data in social networks. Experienced attackers easily collect a veritable “dossier” on the potential victim, who unknowingly posts everything they may need on his personal page in one of the social networks.
4. Consider Using Decentralized Exchanges
Unlike “regular” ones, decentralized exchanges are solely responsible for the interaction of users, and do not hold their assets. In this case, each owner of a wallet is responsible for its safety. Moreover, the exchange cannot block or cancel a transaction.
However, it should be noted that this way of dealing with cryptocurrency cannot be deemed perfect, as in this case, the reliability of storage and transfer depends solely on your knowledge of security matters. Besides, transactions on such exchanges are irreversible.
5. Distribute assets
As with building an investment portfolio, it is worth using asset allocation. But in this case, it works differently.
· If you use cryptocurrency exclusively as a means of investment, that is, with the primary aim to save funds, the best way is to invest them in several currencies. For example, you may distribute money in parts and buy bitcoin, ethereum and several smaller altcoins. In so doing, you can make up for the fall of one currency with the growth of the other.
· Rather than keeping all funds in one storage or wallet, it is better to distribute them among several ones, so that attackers cannot access the entire amount at once. You may store part of the currency, required for purchase/exchange, directly on the crypto exchange and another part, intended for quick replenishment or transfers between users, on a “hot” wallet. Meanwhile, the main amount may be stored in a “cold” (“iron”, offline) wallet (for instance, on the “Trezor” that we’ve already mentioned in our previous publications).
Periodic news about another hack or a major theft of cryptocurrency is not the reason to get frightened and completely abandon it. To begin with, it looks like predictions that the future lies in blockchain and “coins” are starting to come true, as a number of countries (including Russia) are working to create their own legal cryptocurrencies. Their integration into everyday life is only a matter of time. To add to this, if you take a responsible approach to the security of your wallet, your funds will be safe. And, finally, scandalous news often omits one important fact for users: in practically all cases, crypto exchanges take full responsibility for hacking and reimburse users for their losses from their own funds.
Originally published at https://telegra.ph on May 28, 2021.