If you are interested in the topic of cryptocurrencies, you will always come across a central question: How can you effectively protect your investments from scammers, hackers and losses?
When it comes to your ordinary account, the banks and the government are the primary guarantors that online banking has become secure, and fraudsters cannot simply hack your account and walk away with all your funds. However, as with cash, we are responsible for the security of cryptocurrencies ourselves. It is therefore a central issue, so it is definitely worthwhile to think a little more carefully about your personal security strategy for cryptocurrencies in order to protect yourself from fraudsters.
How can the hard-earned Bitcoins, Ethereum Token & Co be protected most effectively?
The most important 5 security tips at a glance:
- Inform as few people as possible about your investments.
- Whenever possible, use hardware wallets to create your cryptocurrency.
- Activate 2-factor authentication on crypto exchanges and use passwords that are as secure as possible.
- Avoid accessing crypto exchanges/wallets via public networks.
- Diversify your investment strategy: Never store all your cryptocurrencies in a single place – be it a wallet or an established crypto exchange.
Distribution to different instances
The most important measure to protect your crypto-currencies is to tell as few people as possible about your investments from the outset, and to store your digital currency in a targeted manner in different places – be it wallets or crypto exchanges. In this way, you already make it considerably more difficult for potential fraudsters to steal the fruits of their hard work.
Therefore, only inform very few selected people, whom you really trust, that you have crypto-currencies. After all, if no one knows about your funds, then you will prevent potential thieves from even entering the radar.
However, this does not only include the people with whom you are actively talking about your investments. Your data can also reveal more about your crypto investments than you might like. For example, just a few months ago it became known that the popular Chinese app TikTok spied on the clipboard of iPhone users, and forwarded the acquired data to Chinese servers. So, if the app’s users have stored their crypto addresses, private keys or the access data for their accounts on crypto exchanges on their iPhone, they have inevitably fallen into the hands of third parties. However, other vultures can also lurk in public networks where it is also possible to gain access to your private data. Public networks should therefore also be off grounds for you. However, if you have no other choice, a VPN for encrypting the data you send over the network can be a helpful saviour in an emergency.
Another important point on the subject of crypto security is your investment strategy – this shouldn’t be neglected either. So: what is the safest way to store the cryptocurrency of passionate Hodlers? The answer is clear: A hardware wallet, which is one of the absolute essentials in the scene for exactly this reason. It gives you 100% control over your cryptocurrencies – without being dependent on a crypto wallet or even your computer.
Despite the hype, it must be pointed out that even a hardware wallet is not 100% secure. If for some reason your wallet or the private key gets lost or, you have the bad luck that your keys are actively stolen, you will inevitably lose all your savings with this method as well.
Most hodlers are therefore careful not to keep their crypto investments on a single wallet or crypto exchange. Instead, they distribute their money to different wallets (both hardware and software wallets) and different crypto exchanges.
The degree of diversification in each case depends entirely on the risk tolerance and the required liquidity of the individual. If a problem with the wallet occurs for unknown reasons, the used crypto exchange falls victim to hackers or the hard disk with your software wallet suddenly gives up the ghost, you will never lose your entire savings. Diversification is therefore not just an empty magic word that only causes unnecessary trouble, but in an emergency, a real lifesaver that every crypto investor should always keep in mind.
The right crypto exchange for your investments
If you decide to use a crypto exchange for some of your cryptocurrencies, you should choose an established large platform. Despite the loudly raging voices in the social media, stock exchanges such as Binance or Kraken have not fought their way to the top of the food chain for nothing. So it is not for nothing that platforms that have been established for years are considered the safest options. As such, you should definitely place much more trust in them than in small, inconspicuous stock exchanges that hardly anyone knows and are correspondingly difficult to assess.
Always keep the following mantra in mind: “Not your keys, not your crypto!”
*Originally published at CVJ.CH
