How Would You Like to Get Your Crypto Assets Hacked During the Recovery?

8 minute read: recommended audience: intermediate cryptocurrency users – there are more complete guides all over the internet about the nuts and bolts of the topics discussed here, this is intended more of a motivational piece for existing users who should know better...

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So your portfolio has taken a hit since the all time highs? You’re not alone… For those of us that recently got used to the good times of ever increasing bitcoin valuations, you probably started buying up some altcoins that appealed to you for whatever reason, I know I did. Whether you chose to diversify into a privacy based project like Monero or perhaps a promising up and coming project for integrating crypto with a debit card, like TenX, the chances are that you did so using the services of a cryptocurrency exchange.

There has been such a constant stream of news about cryptocurrency, ICOs, regulations, bans, etc during the current dawn of wider mass adoption, that it has been hard to keep up with developments in the space from day to day. It may also have made you devote less time to thinking about your security. Now that the markets are down for a while, I suggest that you take the time to overhaul your digital security.

You probably already know that your funds are not secure while they are sitting on an exchange. They are beyond your full control. If the exchange goes bankrupt, you’re out of luck. But having said that, it is very easy to put off making withdrawals into a web wallet, dedicated desktop client, hardware wallet or even a paper wallet where applicable. We may worry that we’ll miss the chance to quickly buy into another rising altcoin, or resent the fees on making a withdrawal, or we may just be a bit complacent and lazy. If you’ve never lost out on a Mt Gox like exchange shutdown, consider yourself fortunate, but (today) think about ways of making sure it never happens to you...

There are other reasons for not withdrawing your assets from exchanges and web wallets into safer storage solutions. This came to my attention very clearly while I was chatting with some young crypto enthusiasts, at a meetup group in a pub in Brighton. In their eagerness to get involved in crypto, they had been encouraged by friends to get started in the simplest way possible, typically purchasing some cryptocurrency using a bank transfer or debit card and receiving their digital funds to a readily available web wallet such as blockchain.info. They didn’t have enough background knowledge to realise that there are much safer ways to store their cryptocurrency.

Having been through huge bitcoin price corrections before, I am no longer as troubled as I was the first few times. I have stayed positive and looked on the recent correction as an opportunity to take a breather and attend to some overdue, but important, security issues. As a cryptocurrencies tutor, this is just the sort of thing I preach to other people to attend to, so there’s really no excuse for not doing it properly myself. I actually made a pact with some guys I met at the meetup group, that the next time we meet, our crypto assets will be held securely, no excuses.

So, I took the time to remedy my security issues (more on that in a minute) so, now I will be able to look them in the eyes when we next meetup. But, if my experiences are typical, the process will not have been as straightforward for the newcomers as it could have been. The user experience in dealing with these kind of processes remains fraught, certainly bad enough to get in the way of imminent mass adoption of cryptocurrencies.

So what happened, what were the pain points and how did I deal with them?

I had some coins on Poloniex, namely Ether and Ripple. In the case of Ripple I had no desire to retain this coin, so I exchanged it for bitcoin. In the case of Ether, I actually would have liked to keep this and hold it on an Ether desktop client. But… In the last six months I have tried installing the Ethereum client on several computers, on each occasion it has proven time consuming and eventually futile attempting to sync with the network. I’m sure this isn’t the case for most people, but as I was using quite high end computers, with up to date operating systems, the failure to smoothly sync and get established left me feeling that the software needed improvement before I could really use it with confidence. I will persevere with the client in due course, but the fact that it took up so much time was enough to put me off using it as my current go-to solution. As I was looking for very secure storage, I also decided against using MyEtherWallet for a webwallet. So, once again I exchanged the Ether for bitcoin. I then withdrew all the funds, as bitcoin, to a cold storage paper wallet.

I have found Poloniex increasingly slow to load pages and perform recently. It is clearly under strain. I’ve liked using the site apart from that, and the withdrawal was successfully processed within minutes. The sluggishness of the website to load pages and such like made me feel relieved to have my assets elsewhere. With this much business earning them fees, I feel a company like Poloniex should be using those earnings hiring people and improving the user experience rapidly, not regressing.

Next stop was Binance where I was holding Monero, Verge, Binance Coin, & IOTA. I prefer this site to Poloniex, it’s faster and smoother, even if it does have some quite tacky marketing on the landing page. Again I ended up converting everything into bitcoin before withdrawing to a paper wallet. Why? Monero and Verge both have working clients and are assets I would like to hold. Well it came down to time and convenience.

I haven’t tried the Verge client yet (I will) but I recently spent a lot of time fiddling around getting the Monero client running properly; I had been aiming to use shapeshift to transfer some funds from other altcoins into Monero at the time, but on that occasion it turns out that there was an issue with shapeshift that, due to their unacceptably long support ticket turnaround time (two weeks at present) I had to abandon (after waiting two weeks with no information about my funds from shapeshift, who did eventually return my funds). Suffice to say that I had no desire to repeat the experience, and decided that, as security was my goal for the day, everything would go into the bitcoin paper wallet solution.

Finally, I decided to empty my original bitcoin wallet from 2014. This one was a survivor; having originally been created on the Multibit client, I almost lost these funds when that software became unsupported. This taught me the importance of knowing my private keys. I was able to recover the wallet and import it elsewhere after some sweating and cursing. This was my main stash so it’s embarrassing to admit that this has been in a webwallet since 2014. Literally every time I loaded up that webwallet online I thought to myself ‘hope my funds are still there, I must put this into cold storage’ but it took me four years to get around to it. Don’t be like me. This wallet was being held on the not very famous Omniwallet platform. Omni is pretty interesting as it is a software layer on the actual bitcoin blockchain that can be used for storing other assets. I’d had some Maidsafecoin stored on here since 2014 associated with a bitcoin address.

Maidsafe is a project aimed at creating a decentralised internet that has been under construction since before bitcoin was released. Maidsafe released a token during one of the first ever ICOs back in 2014 (I think it was called a crowdsale back then). The only way to hold the Maidsafecoin token is through a bitcoin address that you control. The only way to transact Maidsafecoin is through the omni layer. This is why I had this web wallet from Omniwallet. It sounds confusing and it is. Anyway, just like bitcoin, Maidsafecoin can be sent to a paper wallet address for cold storage and that is what I did.

So this left me with a new situation. Bitcoin and Maidsafecoin on paper wallets, Dash and Litecoin on client software which is, and always has been, very usable. Now, on the upside, I have very secure storage of my assets. But, I don’t have a diverse portfolio any more, on the downside. Everything seems to follow bitcoin in times of uncertainty, so I don’t mind this for now.

My takeaway from all of this is that while I will diversify again in the near future, I will only do so with assets that have very good client software that allow for secure offline storage. Yes I may miss out on some rockets to the moon, but I think having good client software and user experience is a sign of a project that has put users first and is likely to have good long term prospects. I’ll write about this when the time comes, one client at a time. Do you need to take security more seriously? Next time there is a huge price increase in cryptos, try not to get complacent, it probably won’t happen to you, but hackers are very sophisticated and you’ll probably be targeted one day, if you haven’t been already. For now, I suggest you put ‘secure my digital assets properly’ on your to do list, and then actually do it...

Well done for reading this far!!! Here's a kitten. If you know anyone that could use this kind of advice I offer a tuition service in the UK, send them my way! Thank you and stay safe...

All images either own content or Creative Commons licensed, no attributions required, but a big thank you to the uploaders.