Were you unable to attend Transform 2022? Check out all of the summit sessions in our on-demand library now! Watch here.
The rise of Bitcoin and other cryptocurrencies has attracted thousands of new users and investors, many of which are still at significant risk of losing their precious tokens to simple mistakes or hackers.
By taking three small precautionary steps, you can help keep yourself safe from mishandling and losing all your tokens, as well as assembling a line of defence from hackers all over the world.
1. Minimize the opportunity for human error
Ironically, the biggest threat to your precious tokens could be yourself.
You’ve heard comically tragic horror stories such as some guy accidently throwing out his hard-drive with over a thousand Bitcoins (worth over $10 million today).
The threat of human error is very real, and it could happen to anyone. It doesn’t matter if you’re new to the crypto game or a seasoned vet, all it takes is one small slip-up and your tokens are as good as gone.
If you don’t protect yourself from, well, yourself, you could end up doing some substantial damage.
Tip #1: When sending and receiving crypto, always copy and paste the address rather than typing it out manually. There’s nothing worse than blasting off your tokens into the abyss just because you thought the number “0” was an uppercase “O”. Be sure to reread and confirm to guarantee the accuracy.
Tip #2: NEVER share your private key with other parties. Once it’s out there, your wallet is instantly exposed to risk.
Tip #3: Don’t send your coins to the wrong crypto choice on exchanges. A minor slipup such as sending your Bitcoin to an Ethereum address could result in lost Bitcoin. Be sure to always double check.
2. Minimize the threat of external stupidity
So, take the possibility of human error and multiply it by the amount of people who have actual control over your money.
As we’ve seen with the simple security loophole that allowed for roughly $50 million to be hacked from the DAO to more recently the over $280 million Ether locked in the Parity wallet due to a single user changing some code, external stupidity is a massive threat.
In all fairness, cryptocurrency security on a massive scale is by no means a walk in the park. Good people are working diligently to build platforms and services to offer convenient security for the average person. However, this doesn’t mean you shouldn’t take precautionary measures to insulate yourself from any potential mistakes. One way to do that is to minimize your dependence on external platforms.
Tip #4: Be wary of using wallets that store your private keys for you. At the end of the day, whoever holds your private key has power over your tokens.
Tip #5: You should also seek to spread your holdings over multiple platforms to diversify some of the risk. For example, if you plan to trade with about $2,000 worth of tokens, there is no need to keep your entire $20,000 worth of holdings on an exchange wallet. You can eliminate some of the risk by keeping the majority of your holdings in one (or a few) hardware wallets. That way if a certain exchange wallet gets hacked, you’re only out $2,000 and not the remaining $18,000.
Tip #6: If you’re participating in an ICO, you need to use a wallet such as MyEtherWallet that you’re in complete control of. When ICOs release their tokens they will often be sent back to the address you used to send your investment. If you sent the Ethereum from an exchange, they most likely will not credit you those tokens.
3. Eliminate the threat of malicious players
Bitcoin and other cryptocurrencies are built using cryptography, which, coupled with blockchain, makes the coin itself theoretically impossibly hard to hack. However, exchanges and wallets are still on the table. The average crypto investor is still exposed to a decent amount of risk of getting their tokens stolen.
Tip #7: If you’re not very careful, you could end up falling prey to an exchange phishing scam. What these scams do is send you content or urgent messages that take you to a nearly identical exchange site to lure you to sign up using your sensitive login information. Additionally, these sites could infect your computer with malware and that’s a whole new nightmare. Be sure to bookmark your exchange site, or type it in directly every time. Always confirm you’re clicking on the right one.
Tip #8: When signing up for an exchange or wallet, always use the security options available. Always use two-factor authentication (2FA), Google authenticator instead of SMS, strong passwords, and secure email accounts.
Tip #9: As a good rule of thumb, your large quantities of tokens should be stored on a hardware wallet. These hardware wallets are NOT connected to the Internet, and your tokens are 100 percent safe as long as they are not online. Most software wallets do a great job of keeping your coins secure, but the fact that they are still online (some even hold onto your private keys) is an inherent risk.
Tip #10: Always double check your addresses when sending tokens. There is a type of malware called CryptoShuffler that waits for an infected user to paste the recipient address, only to swap out the original address for one belonging to the hacker’s wallet.
These 10 tips will help you to establish a more dominant hand when it comes to the security of your tokens. However, it’s crucial you stay informed about any changes in security solutions and stay keen to new hacking and phishing schemes.
Alex Moskov has been active in the crypto space for four years. He currently writes for CoinCentral and Hacked.com and works for New York-based digital agency Juice.
VentureBeat's mission is to be a digital town square for technical decision-makers to gain knowledge about transformative enterprise technology and transact. Discover our Briefings.