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Cryptocurrency security: Best practices to protect your funds

Do you trade on a cryptocurrency exchange but are fearful of security issues? Here is a list of things you can do to help protect your accounts

Introduction

Using a cryptocurrency exchange? Be careful. Exchanges have been hacked before and they’ll be hacked again. Research from ICO Rated revealed that 54% of all cryptocurrency exchanges have poor security in at least one area. Unlike fiat money that is protected by regulations and institutions, you are solely responsible for the security of your cryptocurrency. Here is a list of security best practices to help ensure you stay safe when holding or transacting your cryptocurrency.

Understand the differences between hot and cold wallets 

To trade cryptocurrencies of any kind, you will need to invest in a wallet. Different types of wallets offer varying features, options, and – most crucially – different levels of security for your cryptocurrency. Hot wallets are connected to the internet and bring with them the risks of online criminality. Cold wallets aren’t connected to the internet and so keep funds protected from hackers.

Two-factor authentication

Two-factor authentication, commonly abbreviated to ‘2FA,’ is a must when it comes to protecting your cryptocurrency wallet. Most, if not all, the top exchanges utilise 2FA. This practice requires users to enter two layers of identification to access their accounts. This gives users extra assurances about the level of security available, while deterring cybercriminals from malicious activity. In instances where a hacker obtains your password, they would still need a second method of identification to access the account. This second method involves a human element that hackers aren’t able to replicate.

Strong passwords

Despite 91% of people knowing that using the same password for multiple accounts is risky, 59 percent still do it.  Using a weak password or one that is used for another login can leave your wallet exposed to vulnerabilities. Intelligent hacking tools often have dictionaries embedded into them to search through possible password combinations. To strengthen your password you can use an original combination of numbers, letters, and special characters. Don’t share your password with anyone and if you need to write it down, don’t lose it. Forgetting or losing your password can often prevent you from accessing your cryptocurrency.

Explore different types of wallets

Online wallets and mobile wallets are inherently vulnerable to criminality in the cyber space. Luckily, these aren’t the only wallets available to cryptocurrency users. To improve overall cryptocurrency security, you could consider using hardware wallets. Hardware wallets can be more secure as they give you direct, offline access to your coins, they’re protected by a private key, and they eliminate the risks of being hacked.

Two-factor authentication and strong passwords should still be used to enhance the security of your hardware wallet. This protects you in instances of wallet loss. If you misplace the physical wallet, you still have access to the currency address which allows you to programme a new hardware wallet. Access to your coins doesn’t need to be lost.

Paper wallets are also an option for users who want to minimise their online footprint. Keep your addresses and keys written down on paper and keep them in different locations. Using a paper wallet eliminates the need for any third party sites or applications, arguably providing you with the upmost security. However, lose any part of your keys or addresses and you’ll also lose access to your cryptocurrency.

Avoid carrying large amounts of crypto in a mobile wallet

Mobile wallets and exchanges make trading on the go quick and easy, making them increasingly attractive to crypto users. Keeping a small amount of funds in your mobile wallet is a great idea for making instant purchases, however the simplicity of these wallets is often their downfall. Generally, you just need to download an application and go through a minor registration process but this simplicity also attracts hackers and other malicious attacks. With this in mind, it’s not advisable or secure to carry large amount of cryptocurrency in your mobile wallet. Your funds could be easily compromised. If you’re a serious investor or trader then consider hardware wallets.

Only allow authorised devices to access your wallet

Strengthen your security by only allowing logins from authorised devices. Any suspicious activity from unauthorised devices will result in the user being frozen out of your accounts.  Some users even go so far as to use a dedicated device to access their funds. This ensures that no malware has been picked up from general web browsing and gives the user extra reassurances that the account hasn’t been compromised.

Conclusion

Whether you choose to use a hot or cold wallet, you should always add multiple levels of security. Look closely at the features available on exchanges and be cautious of default wallets. If you’re using an online wallet, be sure to adopt offline methods of security – such as writing down your password. In cryptocurrency, you can never be too careful. Always remember that in this unregulated, often decentralised space, means that your assets are your own responsibility.

To find out more about cryptocurrency trading and keeping your funds secure, access our other guides.

 

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