The protection of cryptocurrency funds must be a first task on the schedule when one is going to invest any meaningful sum in it.
Not every hacker is so honorable to return all the stolen funds back to their owners. You ought to stick to the best security practices and learn how to protect your crypto to avoid unpleasant incidents.
How to buy cryptocurrency and protect your investment
The purchase of crypto is the starting point in your career as a crypto investor. You know, Warren Buffett encourages aspiring investors to be prepared to keep their assets for at least ten years, which means that you should not only look for the place that offers the best sell price but also for the place to safely store an asset for decades.
How to buy cryptocurrency and protect your investment then?
The first part is easy: if you are a Trustee wallet user, you can pull out your phone and buy crypto right now.
How about keeping your coins and tokens on blockchain addresses in the Trustee Wallet? Well, we can boast open source code on Github and Hacken.io security approval. We take security concerns seriously.
Nonetheless, cold offline storage will always be the safest option. Hardware wallets are not invulnerable to security threats yet they offer the balance of convenience and reliability, for a price. But the best option is a mobile wallet, which combines the convenience and reliability, for example, Trustee.
How to protect your cryptocurrency wallets themselves is a whole other concern and we will get to it shortly.
Cryptocurrency how to protect your API keys
The traditional login and password credentials are enough for basic operations on any online exchange. If you have some software development skill or at least consider yourself an advanced PC user, API keys will be of great use.
What are API keys used for? To automatically communicate with a chosen website without the necessity of you entering the login/password duo every time an app on your side requests some info from the website in question. A trading bot could be such an app.
So there you are, typing “cryptocurrency how to protect your API keys” and the first thing you find is that these keys are generally considered insecure because they are physically stored on your device in a plain document.
It is insecure to store any valuable data like this only if you have the reasons to believe that your device can be accessed remotely. Various viruses indeed have the capacity to take control over a remote device completely; stealing personally identifiable information and security keys are the most innocent things these malware programs can do. It is not unheard of that viruses blocked a device, forcing an unfortunate user to pay ransom. How to protect your cryptocurrency and prevent this from happening?
- Never store all of your assets in one place. It is a part of basic financial literacy. Hackers won’t bother to go for insubstantial amounts of money if there is a bigger fish to fry.
- Always be logged in as a guest on your own machine. You are logged in as an Administrator by default on Windows. Besides, Windows is a mainstream OS, so writing viruses for it is cost-effective: indeed more security breaches happen on Windows than on Linux. Linux family OS’es, therefore, are recommended for enhanced security.
- Make sure that a key has a limited validity period and keep the expiration date in mind. The keys without expiration dates are good for all kinds of malicious purposes.
Keep a backup copy of your keys somewhere offline. Writing the key down on a piece of paper will work unless it is too long to be copied that way.
Various password management software, like 1password may help. It encrypts your keys and spares you the trouble of remembering them (especially if there are a lot of them).
How to protect your cryptocurrency wallets
What kind of wallets are there?
Bitcoin and its closest relatives require a user to store a copy of blockchain on their device. This is the core idea of decentralized ledgers: every user must participate in the governance of the network (verify and generate blocks). With each unique user, the degree of decentralization is meant to increase.
This burdensome requirement can easily be circumvented with the help of third party wallet providers. You don’t have to download and update your copy of the public ledger but you have to rely on a wallet provider to protect your assets. How to protect your cryptocurrency in this case?
- Store the assets you don’t plan to move anytime soon in cold wallets.
- Come up with a strong password (possibly generate one with a respective tool).
- Protect your account credentials in the usual ways.
A dedicated device for coin and token storage, which can run transactions and even swap assets. Ledger and Trezor are leading in the niche.
As opposed to cloud wallets, these ones must be installed on your smartphone. It grants you some peace of mind (because you physically own the coins) but the usual security precautions must still be taken:
Never store your credentials on the same device your wallet is installed.
Storing a seed phrase in a plain text format is way more dangerous than writing it on a piece of paper (then cutting the paper into pieces and storing the pieces separately) or at least encrypting it.The seed phrase should not be disclosed by any means especially if someone claims they need it to restore your account.
Use community-approved wallets, e.g. Trustee Wallet.
There is the last question, ‘How to protect your cryptocurrency taxed?’ State-regulated banks guarantee that fiat money—at least a considerable portion of it—will be returned to their owners in case of a bank’s collapse. This is not the case with cryptocurrencies. All you get is a disheartening disclaimer that your assets may be stolen, and that you have to refuse to put any blame upon the company (usually, an online exchange operator). You are wholly responsible for keeping your funds safe, so do it!