Hide ya coins hide ya wife - Cryptocurrency Safety Tips
Yesterday I read yet another story about cryptocurrency theft. This time one of the pioneers of the modern computing world. The Woz had lost 7 Bitcoin in a scam attempting to sell them using PayPal. This is yet another reminder that cryptocurrency creates an entirely new set of risks that we must deal with and learn to mitigate if we plan to make cryptocurrency mainstream.
I wanted to take a little time to walk through a few safety tips you should consider if you plan to dive into the world of crypto. So if you're new to crypto or just want to make sure you are safely bitcoining keep reading.
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1. Your Private Key is Sacred
Every crypto wallet comes with two keys, a public and private key. These keys are the backbone of identifying who you are. Your public is available to the world to let them identify your wallet. Your Private key is only known by you and is used to validate against your public key when you want to make transactions. Anyone with your private key could make a transaction with your balance.
Because of this, you should always guard your private key with extreme caution. Never share it with someone asking for it to make a transaction or some other bogus reason.
It should also be said that you shouldn't store your private keys on a cloud storage or somewhere a savvy computer wiz could get to it. If there is one thing we know about anything that touches the web, it's that it can be accessed by unwanted users.
Many forked coins however, will ask you to input your private key to claim forked coins. If you plan to do this, I urge you to be very cautious and do your research on the safest way to not expose your cryptocurrency balance to any untrusted application issuing forked coins.
2. Thy Mnemonic seed is precious
Many coins use what is called a mnemonic seed to recover a lost or corrupt wallet. This is the list of nonsense words that a wallet client will tell you to safe to recover your wallet. You should write this down on a piece of paper, the real kind made out of trees, and store it somewhere safe. This phrase will allow someone to restore your wallet with all of your funds. There is never a reason you should share this phrase, ever. The only time you will ever use your mnemonic seed is to recover your wallet data with the official wallet client you are using.
3. Backup, Backup, Backup
This may not keep a human thief from stealing your all to precious coins but, it will fight off another thief, faulty hardware.
You never know when your hard drive will crash or a file will corrupt. Because of this, it is absolutely necessary that you backup your wallet file in multiple locations. Most of the time this is as easy as copying a file to a portable hard drive or USB key. I prefer to store my wallet backup files on an encrypted USB key for added security.
4. Exchanges are not wallets
Exchange accounts are not wallets and should not be used as such. Hacking of exchanges has happened many times and there is no doubt it will happen again.
Most exchanges are not insured. What this means is that if an exchange is hacked and goes bankrupt, they may freeze all withdrawals and you may lose your entire balance. You should keep this in mind when storing coins on exchanges.
Your exchange accounts should only contain your trading balance and only an amount that you are comfortable exposing to possible lose. Your coins are always safest on a wallet hosted on your machine with a private key that is safely stored in a place inaccessible to outside visitors.
5. Trade on Trusted Exchanges
The key here is common sense and research. You should always do your research before placing your money into someone else's hands. To play it safe you should always conduct your trades on trusted exchanges, Binance, Coinbase, GDax, etc. Even these should always be used with caution (see point #4).
You should always avoid trading with strangers over PayPal or OTC. There are many ways that your funds can get stolen. See this article: https://www.marketwatch.com/story/steve-wozniak-had-70000-in-bitcoin-stolen-after-falling-for-a-simple-yet-perfect-scam-2018-02-28
Conclusion
By no means is this list exhaustive. I'm sure there are many other things you should keep in mind when dealing with Bitcoin; legality, taxes, scam coins, etc. The list goes on and on and I by no means claim to know them all.
The real moral of the story is that cryptocurrency is still very young and while a very secure means of payment, it is still very susceptible to scams, hacking, and complete lose. You should keep this in mind when dealing with any cryptocurrency and use the utmost caution when transferring your money over the internet.
I wish you the best of luck trading and growing your personal wealth, if you found this post helpful feel free to upvotes and follow me at @clshipp91 for more crypto posts.
Hey @clshipp91, the markets are pretty crazy right now. Crypto is back to a weird space but I know long term it's still what we're all hoping it will be! Cheers
It sure is. I think we will keep seeing swings like this until we get widespread adoption. It'll get there though, still a very young space!
I had the fear put into me of losing my crypto when btc-e went down, which was eventually recovered but this is not a story most people get to tell. Generally when an exchange goes down your currency goes with it. Great advice, sometimes we know exactly what is the right thing to do but we need a friendly reminder. Going to go make a copy of my Mnemonic Seed right now!
Thanks for the read, glad I could help a little! The blockchain really is a safe medium for transactions but, does require people to be aware of some new security precautions.