By Larry Wright
Whatever way you use crypto, whether you buy it, store it, or invest in it, it should be kept secure. The majority of times, losing coins and tokens is permanent. Utilize centralized exchanges that follow KYC and AML regulations. The best security chances are decentralized exchanges with audits and peer-to-peer trading.
Cryptocurrency can be safely stored in a variety of ways. Newcomers and traders can keep their cryptocurrencies with a regulated exchange, and wallet access is unavailable. The best option for security involves having a noncustodial wallet with your keys and keeping it in a cold storage device that’s not connected to the internet. Store both your offline and online private keys in a safe place.
Make sure DApps are not using your wallet regularly and use audited DApps to improve your security. Once the DApp is no longer being used, remove these permissions. Essentially, a sense of self-determination underpins cryptocurrencies, which empower users to take on the role of their bank. If you secure your funds efficiently, you can reach your funds from even the most well-guarded bank vaults. If you don’t do so, someone may be able to empty your digital wallet remotely.
Firstly, if you have a wallet, make sure it’s encrypted. If you don’t have a wallet and are just buying and selling cryptocurrency, make sure you use a secure and reputable exchange. Next, be careful what device you store your cryptocurrency on. If it gets hacked or stolen, all of your money could vanish instantly. Keep only small amounts of cryptocurrency on any device—you don’t want to lose everything if something happens to your laptop or phone!
As you journey down the cryptocurrency rabbit hole, learning how to secure your coins is essential. Storage isn’t the only consideration. The DeFi world involves many cryptocurrency holders interacting with DApps, so keeping your coins safe is also a concern. It would be best if you didn’t trust your coins to any random DApp because you wouldn’t trust an untrustworthy business with your money. This is true equally for any exchange where you buy and sell crypto. Using the following guide, you can protect your crypto assets using the most secure methods.
Keep Your Cryptocurrency Safe
Considering how passionate the world is right now about cryptocurrencies, you’re more than likely in the same boat. There is higher confidence in cryptocurrencies today than in the past, as Bitcoin has reached an all-time high, and cryptocurrencies are generally seen as positive.
WazirX is a popular platform that is safe enough to keep (or HODL) your funds for as long as needed. If you’re trying to protect your cryptocurrency, it’s still a good idea to ensure you don’t get scammed or fall victim to phishing scams. Apparently, between October 2020 and March 2021, at least 7,000 people lost over $80 million in crypto scams, according to the US Federal Trade Commission. Compared to one year earlier, that’s over 1,000%. Based on what we have learned, we have compiled a list of the best practices you should follow when dealing with cryptocurrencies.
Choose the Best Exchange
Understanding where you will store your cryptocurrency is the first step in protecting it. Even if a shady bank promises you the moon, you won’t put your hard-earned money there. Make sure you choose an exchange where you’re most comfortable depositing your crypto and money. If you find yourself in such a situation, the best selection is to go with the most popular cryptocurrency exchange that other users in the same space already trust. For instance, one such exchange in India is WazirX. Millions of users trust this exchange, offering one of the best levels of security you can find from a crypto exchange.
Safeguard Your Private Key
The owner receives an alphanumeric code for accessing a digital wallet or exchange service, which allows him to access his cryptocurrency. Do not let anyone in any way access this key. Furthermore, avoid storing this key on email or note-taking applications since they can also be hacked. It should not be written on paper and left anywhere anyone can access it.
It would be best never to forget your private key to protect your privacy for those who find that amount of security too much. Put your data behind a firewall and encrypt it with a password or use a fingerprint app loaded with security features.
Open Different Accounts for Different Cryptocurrencies
The strategy involves opening multiple accounts when trading in various cryptocurrencies to spread the risk rather than put all your eggs in one basket. To Open two accounts at a secure platform like WazirX so that the other investment will not be affected even if one of the accounts is hacked. If one of your accounts is attacked or hacked, it will preserve your money.
Use Cold Wallets and Hot Wallets
Cryptocurrency wallets are essential for trading crypto as they allow you to interact with various blockchains and manage your public key. You can choose between hot or cold wallets.
When you use a hot wallet, your funds are always accessible, while the funds are kept offline with a cold wallet. When building your fortune over time in cryptocurrency, you’re better off using cold wallets. Those who engage in frequent crypto trading, on the other hand, use hot wallets.
In addition to paper wallets, cold wallets are further divided into hardware wallets, which deserve special attention. On the other hand, hardware wallets give you more control of your keys because they store them cold, offline, and securely. E-comm platforms can direct you in the right direction if you search for hardware wallets, and an investment in a hardware wallet will help you protect your cryptocurrency.
It is a good idea to assume that hackers will target you and take preventive measures in advance to ensure cryptocurrency security. Hackers can use sophisticated methods to steal your cryptocurrencies, such as email phishing attacks and brute force attacks bypassing two-factor authentication. By following the above tips can prevent them by keeping your keys safe and watching hacking-related news.
Cryptocurrencies do not make them immune to hacking, but most exchanges have extraordinary security measures. If you lose cryptocurrency, it is nearly impossible to get it back. Ensure your cryptocurrency assets are secure and safe, and you can get a good sleep at night by following these steps.
What are Private Keys?
You can spend your crypto with a private key, just like a real one. To ensure your overall security, keeping your private key safe is the most important step to ensure your overall safety. A key is just a huge number – so large that nobody could guess. A private key is obtained if 256 times a coin is flipped and a “1” is written for heads, a “0” for tails. Here is the private key that we have so far. It uses hexadecimal code (with 0-9 and a-f letters and numbers) for an easier and more compact representation.
It is the only instance of that number listed on Google (unless it has been replicated elsewhere since then). Therefore, the odds of ever seeing the number before are extremely low – considering how random it is.
The example is still insufficient to illustrate the point. A private key has a possibility equal to all the atoms in the universe combined. Cryptocurrencies like Bitcoin and Ethereum rely on this fundamental security principle. There is a brain-melting range in which your coins are hidden, so they are safe.
In addition to public addresses, which look like random numbers, you may be familiar with e-wallet addresses. Your private key is hashed to get your public address, which is obtained via some cryptographic magic on your private key.
Creating a public address from a private key is extremely easy today, but doing it the other way around is not possible. As a result, you can post about yourself on blogs, social networks, etc. Without the corresponding private key, funds sent to it cannot be spent.
You lose control of your funds when you lose your private key; someone else can use your funds if they learn your key. Therefore, you should keep your private key out of sight of prying eyes.
Seed Phrases
Nowadays, wallets often have billions of private keys. Due to their hierarchical deterministic (HD) nature, this is the case. Generating these keys requires a seed phrase, a collection of words humans can read. It may look like this:
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Even though you only need one private key, when creating a new wallet, you will probably need to store a seed phrase. Private keys and seeds will be referred to as keys interchangeably when discussing key storage later.
Purchasing Crypto Securely
Nowadays, you can buy cryptocurrencies in a variety of places. Among the options are centralized exchanges, decentralized exchanges (DEX), crypto-ATMs, and peer-to-peer platforms. Each security option is unique, so there is no single best option. The best combination of security and ease of use can be found with reputable, centralized exchanges.
Picking a Secure Exchange
Binance’s regulation includes measures against money laundering, known-your-customer (KYC), and security for such a centralized exchange. Even though there were some issues with crypto exchanges in the early days, this situation has since been greatly improved by governments and exchange operators.
You must transfer your funds into a wallet maintained by the exchange before you begin trading. According to your outlook, entrusting your coins to the exchange may provide some safety. Using the exchange’s wallet may be more secure if you are unfamiliar with wallets or new to cryptocurrencies. As a result, you won’t lose your crypto if you lock yourself out of your wallet by mistake.
It is still possible for individuals to manage their money themselves due to security concerns. A common phrase, “Not your keys, not your coins,” says that If you do not own your wallet, you lose control over your crypto. See our storage page for more details.
If there are a few things you should look for to improve your security when using a peer-to-peer network or a decentralized exchange. Verify that a trustworthy source has audited the DEX. You will receive more information about audits later on. The binance company’s reputation and security allow it to offer a DEX. Ensure the peer-to-peer payment service you use requires you and the seller to provide KYC. Make sure the payment service you use supports encryption. The buyer and seller are more protected from scams when a third party holds their funds in escrow.
How to Store Your Crypto Securely
Once you have secured your account and purchased or traded some cryptocurrency, placing it somewhere that is secure should be your next priority. Wallets are your only option if you do not plan to leave the coins on an exchange to trade later. A wallet’s connection to the Internet and ownership of your private keys makes it different. Depending on your level of security needed, you can choose between them.
Hot Wallets vs. Cold Wallets
There are two types of wallets that you can use: hot wallets and cold wallets. The security offered by each differs. As previously mentioned, each category is composed of various unique solutions. Now, we’ll explore what makes them different.
Hot Wallets
Smartphones and desktop wallets that have internet connections are hot wallets, and they tend to provide seamless user experiences. Cryptocurrency and tokens are easy to send, receive, and trade with them. However, their use poses several security risks.
The internet connection of hot wallets makes them inherently vulnerable. It is possible for malicious actors to remotely access your online device even though private keys aren’t broadcast.
Cold wallets offer slightly more security than hot wallets. Hot wallets are generally preferred for holding smaller balances because of their usability.
Cold Wallets
Many people tend instead to keep their keys offline all the time to minimize the risk of online attacks. They use cold wallets for this. Hot wallets utilize the Internet, but cold wallets don’t need it. Some cryptocurrency holders once used paper wallets, which contained the private key for the wallet on a printed piece of paper, often embedded with a QR code. These methods are now considered outdated and risky. Hardware wallets are the best options for cold storage.
Hardware Wallets
Hardware wallets keep the private key offline to improve the user experience. Unlike a full PC, this type is more portable, cheaper, and explicitly designed to store cryptocurrency.
Your private keys are stored on physical devices that never need to be connected to the Internet. Private keys cannot leave the device with a good hardware wallet, and a special compartment in the machine prevents them from being removed. Hardware wallets have grown rapidly in the past few years. Read Binance Academy reviews for more information about these products.
Custodial vs. Non-Custodial
Additionally, custodial and noncustodial wallets are available. Your private keys enable access to your wallets. When you use a service like a cryptocurrency exchange, you do not own your cryptocurrency, and an exchange manages your funds and keys on your behalf rather than keeping them. Most exchanges employ both hot and cold wallets to keep hackers at bay as protection.
When you trade BNB for BTC, the exchange decreases your BNB balance while increasing your BTC one. Blockchain transactions do not take place. The exchange will sign the BTC withdrawal transaction on your behalf when you decide to withdraw the Bitcoin. You will then receive your coins to your Bitcoin address via a broadcast transaction.
Users whose funds do not need to be kept by third parties can find cryptocurrency exchanges more convenient. When you are your bank, you cannot call anyone for assistance if something goes wrong. Losing your private key means you cannot get your money back. To regain access to your account, you must reset your username and password if you forget them. Secure your credentials as soon as possible since they are still exposed.
Safeguarding your crypto assets is made easy with Bitcoin mixers. Whether a mixer is noncustodial or custodial, they offer fair privacy. But to explain how one differs from the other, we must distinguish between them. You need to change your wallet details after mixing UTXO with a set of wallets since you can track them if you repeatedly use the exact wallet details. Digital clean houses are Bitcoin mixers. Use a bitcoin mixer, and it’s the best way to go!
Conclusion
Trading cryptocurrencies can be a very profitable investment strategy for educated people. However, the industry is still full of risks that can drastically change a business plan in seconds. The biggest threat is a security breach; thus, it is essential to implement the most advanced safety measures available. As discussed in this post, you should secure your cryptocurrency just in an emergency.