How To: Keeping Your Cryptocurrency Safe

in #ethereum5 years ago

Cryptocurrency is a major target for hackers because a lot of people are failing to secure their funds correctly and the potential payout for the bad guys is huge. Below I'll outline some best practices that I use to keep my Cryptocurrency safe (feel free to add your own in the comments)! I'll refer to Cryptocurrency as 'assets' for the rest of this article.

DO NOT leave your assets on exchanges:

I believe this is the most important rule to keep your assets safe. Many people have lost all of their assets due to simply leaving them in exchanges that have either been hacked or shut down (such as Cryptsy and MtGox). Due to the unregulated nature of Cryptocurrency, an exchange can be forced to shut down at any moment taking all assets with them. Exchanges are also major targets for hackers as they tend to hold hundreds of millions of dollars worth of assets at once.

Store your assets in a wallet that you control the keys to:

If you don't control the keys to your assets then you don't control what happens to them. If your assets are on an exchange or an online wallet then those third parties control them and you are leaving the responsibility of keeping them safe in their hands.

Instead, store your assets in a wallet that you control the keys to (such as MyEtherWallet) or any client-side wallet. It is also a good idea to encrypt your wallet with a unique passphrase for an extra layer of security.

Use a hardware or cold wallet:

The single best way to secure your assets is to store them on a hardware wallet (such as Ledger Nano S). The only way for anyone to access your assets would be to either have physical access to the hardware that they are stored on or access to your private key. Hardware wallets are also usually protected by a code to access them (for example, the Ledger Nano S allows you to assign a pin to the device before it can be used).

Cold wallets are similar to hardware wallets in that the only way to access the assets is to have access to the private key. You can create cold wallets at MyEtherWallet.

When trading, use 2 factor authentication (2FA) on all exchanges:

If you have assets stored in exchanges in order to trade them, make sure to enable 2FA as this adds a very good layer of security to your account. For example, if your password was to be compromised an attacker would also need access to your 2FA code in order to log in to your account. 2FA codes are usually sent via text message so this means that the attacker would need to be able to read the text message in order to gain access.

Be careful when sending assets to other addresses:

When moving assets around it can be easy to accidentally send assets to the wrong address and due to the nature of cryptocurrency, transactions are irreversible. What I like to do is send a very small amount of an asset to an address that I intend to send large amounts of assets to. If that transaction goes through correctly, I move the rest of my assets knowing that I have the correct address.

Backup your wallets:

Always remember to keep at least one offline backup of all of your wallets. I like to use a USB for this or physically write down/print out my private keys and store them in a safe place.

Always remember the golden rule: If you don't control the keys, you don't control your assets.

I hope this helps all of you in securing your Cryptocurrency :) If you have any questions, please ask them in the comments!


Interesting writeup. Thanks a lot

Thanks for reading :)

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