After the crypto winter of 2018, the market price of cryptocurrencies has recovered again. As the value of cryptocurrencies rises, both investors and cybercriminals become active.
If you have a stake in the crypto space and hold cryptocurrencies in your portfolio, you need to be vigilant. Vigilant not only to the market trends but also against the attempts of online scammers and hackers.
Since the inception of Bitcoins in 2009, there have been various attempts to hack cryptocurrency exchanges and wallets by cybercriminals to siphon off the money stored in these digital assets.
What is important to understand here is the fact that your digital assets such as Bitcoin, Ethereum, XRP, Solana, etc. are mainly under threat through your digital wallets and crypto exchanges. These wallets and exchanges don’t hold your crypto coins but what they do hold is your private key.
What is a private key?
Your private key is essentially your digital identity. It is this Key that allows you to participate in the cryptocurrency market. You can only buy and sell your cryptocurrencies through your private key. If you are to ever lose this private key, you essentially lose access to your crypto assets.
And if somehow this key goes into the wrong hands, the holder of this key can anytime access your crypto wallet and make fraudulent transactions against which you have no recourse. Hence the importance of your private key cannot be overstated.
Cybercriminals on the other hand are always on the lookout for your private key. They use sophisticated techniques through which they want to either hack your crypto exchange or gain access to your private key. This is the main reason you should always be vigilant and make sure that your crypto wallet is secure at all times.
Before we discuss ways in which you can keep your crypto wallets secure we need to discuss the types of crypto wallets there are and what kind of security they provide to your private key.
Types of crypto wallets:
- Hot Wallet: Hot wallets are crypto wallets that you use on your computer, tablet, or your cell phone. Because these wallets are often connected to the internet through your device they are also called online wallets. Because these wallets are connected to the internet through your respective device these wallets are susceptible to hacking. People mainly choose to use hot wallets because they store your private key and thus you don’t need to remember the key yourself. These wallets work faster and are very convenient to use, posing security threats. It is recommended to use hot wallets like you would use your checking account. Like you only keep your working capital in the checking account and store most of your savings in a savings account or investment instruments similarly you should only keep as much cryptocurrency in your hot wallets as you deem to be your working capital.
Another important point to consider is that your exchange wallets are also hot but they do not give you a private key to your crypto assets. As such, exchange wallets may well provide you more security than your hot wallet but if these exchange wallets are hacked you too will lose your crypto assets stored in these wallets. And since you don’t even get your private key when you store your crypto assets on exchange wallets, it is advised never to keep the bulk of your crypto assets in exchange wallets.
- Cold Wallet: Cold wallets are your offline wallets. These wallets are called cold wallets because they are not connected to the internet through your devices such as a computer or mobile phone and thus they pose less chance of getting hacked. A cold wallet is generally a hardware device like a USB that comes with software so when you connect this USB drive to your device you can easily access your crypto assets.
After you are done, you simply remove this USB drive and store it at a secure location where it is not connected to the internet. This cold wallet contains your private key and thus you are always in possession of your crypto assets which is not the case when you use exchange wallets for example.
- Paper Wallet: While cold wallets can be kept securely away from the internet when they are not in use when you use these wallets on your device for a limited time they are connected to the internet and during that time they are susceptible to hacking. The most secure wallets are paper wallets. You can generate these wallets off certain websites and you can then print your public and private keys on a piece of paper. So that this paper remains undamaged you can also laminate this paper and keep it in a secure location. Since a piece of paper can never be hacked this is the most secure way to store your private key.
Additional ways to secure your crypto assets
Apart from keeping your cryptocurrency in cold wallets and paper wallets, there are also other ways in which you can enhance your crypto asset security even further. Here are a few of these.
- Secure Internet: Always use a secure internet connection when you are accessing your crypto wallet or making transactions. Make it a point to never access your wallet on a public wi-fi network. If possible, also use VPN services on your device.
- Multiple Wallets: As the saying goes, never keep all your eggs in one basket so you should never keep all your crypto assets in one wallet. There is no limit to the number of wallets you can thus always have more than one and divide your crypto assets among them.
- Keep your devices secure: You should always keep the antivirus software updated on your device so your device already has the latest virus definitions. This will go a long way in providing you with an additional protective cover in the online domain.
- Passwords: Most people use the same password on all their devices and social accounts. This is certainly not a good practice. You should have different passwords for your accounts and always maintain a practice of changing your passwords within a few months across all domains.
The crypto space is littered with scammers and cybercriminals who are always on the lookout for their next target. In such circumstances, it is your responsibility to keep your crypto assets as secure as you possibly can if you don’t want to become prey to these hunters.
Follow the above-mentioned security practices and also keep yourself abreast with the latest news and technological advancements in the crypto space. When you are informed you always make informed decisions and this is the only way you can always stay safe in the crypto ecosystem.
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