Cryptocurrencies, by themselves, are inherently safe because they are based on cryptography. It would be impossible to “hack the blockchain” or a private key, an attempt to break a cryptographic protected algorithm would require an unfeasible amount of computational power. The only way to steal a wallet is taking advantage of its owner’s personal carelessness. And a lot of people, especially those that are just getting started investing in cryptocurrency, are not careful enough. Follow the cryptocurrency security tips we describe in this guide to keep your digital assets safe and to avoid paranoid thoughts before going to sleep.
Even throughout the short cryptocurrency history, there have already been countless cases of cryptocurrency theft. These cases range from large cryptocurrency exchange hacks, to assaults and phishing attacks. One of the most notable ones happened back in February 2013, when the exchange Mt. Gox was hacked out of approximately 850,000 BTC (worth $450 million at the time). Mt Gox was the largest Bitcoin exchange at the time and everyone trusted it, yet it was hacked anyways. This is an important lesson that we will be repeating throughout this cryptocurrency security guide.
Cryptocurrency Security Tips
Beware of phishing scams
A very common scam technique used by hackers is creating a fake, identical version of the exchange or web wallet page they use and mailing the link to the victim, usually with a convincing message that convinces them to log in and take some action instantly. A lot of people access these sites, enter their data and the hackers take that data and do what they want. To avoid phishing, always check if the link showing in your browser perfectly matches the one of your exchange or web wallet.
Keep your device safe
Make sure you have an updated antivirus and firewall enabled. Don’t install any software you’re not entirely sure about the safety. Of course, never download any suspicious attachments and make sure to research about the reputation of a software you’re about to install, using Google, social media like Reddit or friends more knowledgeable about the topic.
Don’t store your cryptocurrency on exchanges
You can assure you’re taking the right actions to protect your cryptos, but you don’t know if your cryptocurrency exchange is doing the same. There have been some notable cases about large exchanges freezing or losing their users funds, due to technical errors or hacks. Always withdrawal funds in your exchange to your wallet if you’re not planning to trade them there so soon.
If you insist on storing some cryptocurrency on an exchange, then at least check out our list of best cryptocurrency exchanges for beginners. The top 3 exchanges on that list can be considered trustworthy and will most likely keep your coins more secure than others do.
Enable two-factor authentication
Two-factor authentication includes an extra layer of security to the validation procedure by making it harder for attackers to invade your wallet or exchange account, since knowing the password alone isn’t enough to give access to them. Most wallets and exchanges offer 2-factor authentication options, like requiring a random PIN sent to you by SMS or e-mail.
Use difficult passwords
When creating a wallet or cryptocurrency exchange account, you always need to use an extremely secure password. Try to combine upper and lowercase letters, numbers and symbols whenever possible. If you want, there are also online password generators that you can use like for example Passwords Generator.
After you created your password, make sure to store it on a safe place. The best place is to write it down on a piece of paper to store it offline, but you can also make use of your trusted password keeper.
Avoid public WiFi
Wifi hosts can direct your browser to any page, which can be, sometimes, a mimic version of your exchange or wallet. They can also collect data transmitted through the network which, in case, includes the password you typed. If you need to access your wallet from a public WiFi, use a VPN.
Buy a cryptocurrency hardware wallet
Cryptocurrency hardware wallets are by far the safest way to store your digital assets. A cryptocurrency hardware wallet is a specialized device that stores their user’s private keys inside of an impenetrable circuit and allows them to sign transactions with a single click. They also come with a “seed”, a physical paper that allows the users to transfer their keys to another wallet in case the device is lost or stolen.
Before purchasing a hardware wallet, make sure to check out our comparison table of the best cryptocurrency hardware wallets.
Don’t get caught up in pump and dumps
A pump and dump is a tactic by which an influencer, or a group of people, generate hype in order to get a lot of people to buy a cryptocurrency at the same time. By getting all these people to buy a coin at the same time, its price rises astronomically in just minutes, enabling the organizers of the pump and dump to “dump” on all the people buying at a higher price.
This is a highly illegal practice in both traditional markets and also cryptocurrency markets, and you should stay away from it not only for legal reasons, but also to keep your cryptocurrency safe. The organizers will try to lure you into participating by promising outlandish returns, however, fact is that only the insiders and the organizers will be profiting from this endeavour.
It is not uncommon that a coin plummets over 95%+ after the pump and dump is over (like in the case of ChainCoin), hence why its such a crucial cryptocurrency security tip to just stay away from this.
Keep your holdings private
There have been numerous cases of people getting assaulted, or even murdered, by bad actors pretending to steal their cryptocurrency. One sad example is the one of a Norwegian man that was brutally murdered after conducting a larger in-person Bitcoin transaction.
Stealing cryptocurrency is especially attractive for criminals, over say a bank account, due to their anonymous nature. Money stolen from a bank account is usually tied to an identity and can be retrieved in some cases, on the other hand, Bitcoin and most other cryptocurrencies are uncensorable and hard to trace to an identity. Its therefore crucial to never tell anyone how much cryptocurrency you hold. This is especially true when talking with strangers on blockchain conferences or cryptocurrency meetups.
Another cryptocurrency security tip that is related to this one is to add a password to your cryptocurrency portfolio tracker if possible. Some crypto portfolio trackers do offer this feature and you should make use of it if you want to avoid someone discovering your holdings if your phone is ever stolen.
Be careful with Bitcoin gambling sites
Many people enjoy Bitcoin gambling due to the anonymity aspect of it. However, this anonymity can also come as a disadvantage. Many Bitcoin gambling sites are running without disclosing who is behind the site, hence making it impossible to check if the platform has the appropriate licenses.
In order to keep your cryptocurrency safe, you should only use trusted Bitcoin gambling sites that have been around for at least 1 year, and where there are several good reviews online.
Consider encrypting your data
Most core software wallets allow you to download a .dat backup file containing your keys. You can use a software called VeraCrypt to encrypt this file and keep it in a USB stick so, even if somehow an attacker manages to invade your device, they won’t be able to manipulate your wallet if it’s encrypted.
Cryptocurrency theft has become an incredibly popular business over the past years. Their increasing popularity is attracting the attention of groups of hackers that usually targeted banks, as the cryptocurrency market proves to be more profitable.
You shouldn’t, therefore, panic about it or think they are not a safe option. They are just (or more) as safe as using online banking. If you dedicate some effort to follow the aforementioned measures, it’s very unlikely that something will happen to your cryptos. If you always keep in mind these cryptocurrency security tips, then you should be safe from most of the danger.
This article was written with the help of King of Investing, creator of the excellent guide “How to invest in cryptocurrency without spending a fortune“.
Do you have any questions about any of the above cryptocurrency security tips or think that we missed one? Make sure to let us know in the comment section below!
CoinDiligent Staff Writer