In the crypto trading and exchange world, 2019 was a significant game-changer. No less than twelve exchanges were hacked, leading to more than half a million pieces of user data being compromised and financial losses of over US$290 million.
While these high-profile hacks were unfortunate, the silver lining is that traders and exchanges have paid greater attention to cybersecurity in the last few years. Despite the increased awareness, though, attacks can and do still happen.
Certain currencies, including Bitcoin, are surging, with Bitcoin hitting a record high of US$42,000 per coin in January 2021. A value such as this is an attractive target to threat actors.
But nefarious criminals are not the only concern. Inherent vulnerabilities in code, ransomware and exit scams (where platforms ‘disappear’ and the operators retain all the trading coins) are all valid concerns.
If you’re holding a crypto wallet or a few wallets, it pays to keep your investments safe. Here, we detail how to secure your wallet in 2021 and beyond.
Crypto wallet security measures
Choose ‘cold’ wallet storage
First and foremost, we would like to emphasize the importance of other wallet options. Rather than keeping all your funds in one ‘hot’ wallet (one that is used to make trades actively) or in exchanges, it is best to move significant amounts of coins to ‘cold’ wallets.
You will still need a hot wallet or several to make trades, but you can transfer coins as needed to your hot wallet from your cold wallet. Cold wallets are also known as ‘hardware wallets’ and ‘offline wallets.’
Because cold wallets are not connected to the internet (unless plugged into a device and being actively used), they are less likely to be compromised. These physical devices can only be accessed with a private key.
Bolster your security protocols
Above and beyond following good digital hygiene practices (complex and unique passwords, multi-factor authentication, and so on), crypto traders should take a few additional steps to secure their online coins and accounts:
- Use a secure email service – When opening a crypto wallet or an account on an exchange, choose a secure, encrypted email service. Ideally, you should use a different email address for each account you hold to mitigate any potential losses. End-to-end encrypted email is far safer than traditional options such as Gmail or Outlook. Try ProtonMail or a similar option instead.
- Always use a VPN while trading or making transactions – A Virtual Private Network (VPN) makes securing your bitcoin and other currencies easier by generating a private browsing network. When you trade or make transactions on this network, your activity is shielded from any prying eyes. In addition, the VPN encrypts any data transmissions you make.
- Consider an email scanner – The crypto world is full of bad actors, and scams and phishing attempts are par for the course. While your primary defense against these should be your suspicion, an email scanner can help identify possible phishing attempts and malware.
- Be wary of others – In line with the above, treat the other traders you meet on forums and exchanges with a certain degree of suspicion. Always keep yourself and your trades private. You should also avoid publicizing your fruitful trades on exchanges so as not to draw attention to yourself.
Use multi-signature (multisig) whenever possible
Multisig refers to multiple signatures, and it can be applied to both wallets and individual transactions. Using multisig provides an extra layer of security as more than one digital signature (or key) is required to gain access or to authorize a given transfer.
When you use multisig, you avoid a single point of failure, making it less likely that a wallet or transaction will be compromised.
While there are inevitably risks involved in cryptocurrencies, including the security of your wallets, there are steps you can take. Follow the steps and suggestions above for increased crypto security in 2021 and beyond.
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