Despite the volatility that cryptocurrencies have experienced in recent times, many people still view them as safer alternatives when compared to traditional fiat currencies. While the blockchain-based decentralized nature of the crypto world makes is less vulnerable to hacking, exercising caution is essential if you hope to get through unscathed. After all, the risk of cyber criminals who keep upgrading their skills remains omnipresent.
Basics of Keeping Cryptocurrencies Secure
If you’ve recently purchased a cryptocurrency or plan to do so in the near future, keep these pointers in mind.
- Secure your computer by using reliable antivirus software along with a firewall, and run scans regularly.
- Steer clear of new initial coin offerings (ICOs) that you feel wary about.
- Do not fall for phishing scams by providing any kind of sensitive information in response to an email.
Keep Your Private Key Private
With a regular bank account, someone would need your login ID and password to access your account. However, when it comes to cryptocurrencies, all a criminal needs is your private key. This makes is very important that you do not share your private key with anyone, even for a brief moment.
How Should You Store Your Cryptocurrency?
While sharing your private key is never recommended, if you use a crypto wallet, you might have little to no control over your private key. This is especially the case if you use the services of a cryptocurrency exchange. However, people continue to use them because of the ease of buying and selling cryptocurrencies that they provide. Other than you having no control over your private key, you are using a hot wallet. For the long term, a cold wallet is the ideal way to go.
Hot Wallets vs. Cold Wallets
The main difference between hot and cold wallets is that while the former are online the latter are offline. If you use a hot wallet provided by an exchange, and in the event the exchange gets hacked, you stand to lose all the money you have stored in your wallet. While the possibility of this remains slim, the attacks targeting Mt.Gox, Youbit, and Bitfinex, should give you enough reason to be cautious. If you’re using a hot wallet, make sure you opt for two-factor authentication.
Cold wallets give you complete ownership, and they require your participation to connect to the internet. The two most commonly used types include paper and hardware. With a paper wallet, you simply print and store your private and public keys. What you need to be careful about is not losing the paper and using ink that does not fade away. A hardware wallet can come in the form of a USB drive. This mode gives you increased flexibility when compared to paper.
Encrypt Your Data
Data surrounding your cryptocurrencies is sensitive, so it is important that you go the encryption way. Gav Smythe, founder of iCompareFX, opines that you should “consider using double or triple encryption.” He suggests making multiple file containers to store passwords and wallet backups. For additional safety, he feels you should store encrypted wallets and private keys on different virtual file stores, and use different passwords for both.
If you have your money in a bank, it’s the bank that essentially owns your money. All you need to bring this fact to light is an economic crisis. Cryptocurrencies work in the same way, where if you don’t have control over your private keys, there is no telling what might happen to your money. Invest in cryptocurrencies only if you think you are up to learning what it takes to keep your money well and truly secure.
Jon works as a researcher with iCompareFX. This online platform lets its users compare leading international money transfer companies from different parts of the world. It also provides extensive reviews and access to special promotions.