Cryptocurrency Security: How to Protect Your Digital Investment

By Alexander Joe

 

Security has entered the cryptocurrency (crypto) ecosystem and seeks to combat the rise of cybercrime. Although cybercrime is not a new phenomenon, Cryptocurrencies have become the latest target for theft and hacking. 

As more people diversify their investments with crypto assets, they may become targets of cyber theft and security breaches. As crypto expands and advances, so do the methods hackers use to steal digital coins and tokens.

However, if you take the time to research protective measures and take precautions, you can secure your crypto assets and sleep well at night. 

There are several methods you can take to secure your digital assets. By doing so, you can prevent thieves from accessing your assets.

Here, we’ll discuss:

But first, what is a cryptocurrency all about?

What is Cryptocurrency?

For those new to everything crypto, Cryptocurrency is a form of digital encrypted currency that utilizes blockchain technology. Crypto operates on a decentralized network that is run independently from any financial institution or government. All transactions are fast, secure, and immutable, meaning they cannot be changed.  

Some of the most popular cryptocurrencies include Ethereum, Binance Coin, Cardano, and the most valuable of them all, Bitcoin. All crypto trading occurs on exchanges that are open 24hrs a day.

The Risks

With any investment there are risks. Despite the security protocols built into blockchain technology, individual tokens and coins are not impervious to theft. The two-stage authentication process used in transacting crypto is already an advanced security method, but there are still risks involved. Let us look at some of the risks which could affect your investments:

1. Crypto exchanges: 

Most new investors start by storing their crypto assets in crypto exchanges. Having one single location can make your digital assets vulnerable to hacking, not just by random thieves but even by employees of the exchanges themselves.

2. Personal information breach:

Your personal information could be at risk from hackers. Phishing scams, SIM swaps, and other tactics can bypass the authentication process, giving hackers access to your digital assets.  

3. Storage loss

Due to security issues storing your digital assets in exchanges, some opt for physical devices. These devices could be stolen, damaged, or lost. Moreover, if you lose or forget your password, there will be no way to retrieve your assets and will be permanently lost.

4. Loss of generational wealth

If the holder passes away unexpectedly without taking measures for their estate, their beneficiaries cannot access the holder’s digital assets. 

How to Protect Your Digital Assets

Research Crypto Exchanges

First things first, take the time to research reputable crypto exchanges to diversify your wealth. Understand how they work and contact crypto advisors to get better insights into the market. There are many trustworthy crypto news sites, such as CoinJournal, providing up-to-date news and helpful advice. 

There are several crypto exchanges you can research, such as:

Ways to Store Your Cryptocurrency

When you purchase your crypto, store it in a secured digital wallet or exchange. Exchanges give you access to one location to trade coins. However, you need to find the best crypto exchange to house your crypto to safeguard against hacking.

Digital wallets are one secure way to protect your digital assets and come in two varieties; physical or “cold” wallets and online or “hot” wallets.

Physical Wallets

Physical wallets work like an external hard drive that stores the digital coins offline. To access your digital assets, you need a private key. This key is a password that gives you access to your  tokens or coins. Although cold wallets are great at keeping cyber thieves away, the device itself is prone to loss, damage, or theft from an old school burglar.

Online Wallets

Conversely, online wallets work the same as cold wallets, but without a physical device. Your access key is needed to obtain the digital assets. Like cold wallets, if you lose your access key, the contents are lost forever. Make sure you store the key in a safe place, such as a safety deposit box.

The Hybrid Approach

The Hybrid approach involves storing your digital assets in both digital wallets and exchanges. Most investors have both physical and digital wallets where they spread their assets.

Investors also leave a small portion of the digital assets in crypto exchanges for the ease of transactions. Users should make sure their private and public access keys are kept separate from their crypto storage devices.

Your Secret Key

When you transact with cryptocurrencies, you use a personal key or password. The key verifies that you are the owner of the digital currency. Make sure to print out your access key and leave no trace of it online. This is known as “cold storage.”

Another method to keep your key safe is using a “seed.” A seed is a series of words or phrases randomly generated which a user uses to obtain their key. Your seed phrase, like your key, needs to be kept somewhere safe offline.

Also, it’s a good idea to change your password regularly to protect your digital assets.  

Final Thoughts

Cryptocurrencies have become a feature in modern life that is constantly evolving. However, so are cybercrime and fraudulent activities. To keep your digital assets safe, you need to be proactive and vigilant. Use various safety measures from digital wallets to access keys to safeguard your investments and your wealth.

You may be interested in: The importance of cybersecurity in 2021