If you’re going to invest in or use cryptocurrency, it’s absolutely vital that you keep your cryptocurrency secure and protected. After all, without the assurance that you control your cryptocurrency and that no one else can access it, there’s no way to safely invest in or try to use it. This article will tell you how to protect your cryptocurrency from the moment you purchase it to the time when you choose to sell or spend it.
Why You Should Keep Your Cryptocurrency Safe
Cryptocurrency is seeing massive gains in value. More and more people are getting interested in the benefits of blockchain technology and the cryptocurrency that fuels it. However, those gains in value and attention make cryptocurrencies an attractive target for thieves.
Criminals like cryptocurrencies because it offers relative anonymity. If they can take it from you, there’s no way to prove it’s yours. As a result, they try a variety of phishing attacks and fraudulent scams to try to get access to your cryptocurrency. Further, hackers have been known to attack both individual users and cryptocurrency exchanges to gain the private addresses of cryptocurrency, at which point they’re able to take possession.
With these threats to a cryptocurrency user, it’s crucial to know how to protect your cryptocurrency. Taking a handful of security precautions can ensure your cryptocurrency is safe.
Bonus read: How to Set Up a Cryptocurrency Wallet
How to Protect Your Cryptocurrency
The following cryptocurrency security tips are some of the ways you can make sure your cryptocurrency is secure.
1. Use Reputable Exchanges
There are a number of cryptocurrency exchanges out there, with seemingly more springing up every month. Many of them have various advantages and disadvantages, which could be the subject of an entire other article. But from a security standpoint, the main point is this: You’re trusting an exchange on two important levels.
First of all, you’re trusting them to be honest. Most exchanges are legit, but a few have historically been found out to be scamming their customers. These exchanges tend not to last long. Second of all, you’re trusting their security to keep your cryptocurrency safe from third-party agents. There have been a handful of well-publicized hacks on exchanges where hackers have made off with millions of USD worth of cryptocurrencies.
When choosing an exchange for buying, selling or trading cryptocurrency, go with an exchange with a multi-year track record and a large and satisfied client base. This will greatly decrease your chances of being victimized.
Bonus read: How to Buy Cryptocurrency
2. Enable Two-Factor Authentication
Two-factor authentication (2FA) is a security measure many cryptocurrency exchanges offer to make sure no one unauthorized can gain access to your account. Two factor authentication means that in addition to a username and a password, you need to provide some other means of proof to demonstrate that it’s actually you logging in.
In many cases, the second means of authentication will be linked to your phone. When you enter your password, you’ll be sent a text message with a number or phrase, which you’ll need to enter on the site in order to complete the login process.
This prevents someone from learning or guessing your password and logging in to clean your account out. Now, a would-be thief would need to steal not only your password but also your phone, which makes breaking into your account exponentially more difficult.
3. Take Your Cryptocurrency Off the Exchange Wallet
Nearly all cryptocurrency exchanges will store any cryptocurrency you buy on their wallet. If you’re going to be engaging in active cryptocurrency trading on a high-volume basis, you probably will want to leave your cryptocurrency on the exchange, both for convenience and cost.
However, if you’re buying cryptocurrency either to hold onto long-term or to use to buy goods and services, the exchange wallet isn’t the best place to keep your cryptocurrency. The bottom line is that while your cryptocurrency is on the exchange wallet, you don’t really have ownership of that cryptocurrency – the exchange does. They hold the private keys for the cryptocurrency, which in the world of crypto is what matters.
If you’ve followed step 1, you’ve probably chosen an honest exchange that wouldn’t cheat you or steal your cryptocurrency. However, a hack could happen to anyone, even the best and most established exchange. As we’ve seen in recent years, companies both massive and competent have been targeted by successful hacks and intrusions.
By taking your cryptocurrency off the exchange wallet, you no longer have to trust that the exchange is able to maintain their security integrity. You have the means to make your cryptocurrency virtually impossible for online predators to access.
4. Invest in a Cold Storage Wallet
Beyond an exchange wallet, there are a number of ways to store your cryptocurrency. Out of the available options, the best storage option is a hardware wallet, also called a cold storage wallet. If you’re looking for the ultimate in how to protect your cryptocurrency, the cold storage wallet is it.
Cold storage wallets are called that because they store your cryptocurrency off the internet (software wallets are called hot wallets). This greatly limits the ability of hackers to target your cryptocurrency. With the best hardware wallets, you could access the wallet from a computer totally infected with viruses and malware and hackers would still not be able to steal your cryptocurrency.
A cold storage wallet may cost around 100 USD, which might seem like a prohibitive investment when compared to storing your cryptocurrency on an exchange wallet for free. However, if you’re going to be dealing with large sums of cryptocurrency, the hardware wallet gives you an assurance of security that other wallets can’t match.
If you’re going to invest heavily in cryptocurrencies and are serious about protecting your investment, a cold storage wallet is ultimate protection for your cryptocurrency.
Safest Wallets and Exchanges
The following are the best options in exchanges and wallets for keeping your cryptocurrency safe:
- Coinbase: Coinbase is the largest and most established exchange in the world. They only offer a few cryptocurrencies: Bitcoin, Ethereum, Litcoin and Bitcoin Cash. If that’s what you’re looking for, they’re as safe as it gets.
- Kraken: Kraken is a well-established exchange offering trading on 17 different cryptocurrencies. If you’re looking for a less established cryptocurrency, Kraken is a good bet.
- Binance: Another exchange offering a wide range of cryptocurrencies, Binance is quickly growing and has a strong reputation.
- Trezor: Possibly the most secure option on the market, a cold storage wallet.
- Ledger Nano S: Another cold storage wallet, right up there with the Trezor.
- KeepKey: Yet another solid cold storage wallet option.
Following the steps outlined above gives a good guide on how to protect your cryptocurrency. From choosing the right exchange, to making sure you’re secure while using that exchange, to ultimately protecting your cryptocurrency with the best wallet possible, this process will keep your cryptocurrency out of the hands of would-be thieves.
Hopefully, this gives you the tools you need to use cryptocurrency with confidence and peace of mind. If you’ve got your own experiences, questions or thoughts about how to protect your cryptocurrency, please share them below.