Security Risks that Come with Storing and Trading Cryptocurrencies and How to Protect your Coins
Bitcoin—the most popular cryptocurrency was established out of a lack of trust for the traditional means of transaction and a desire to have a new system, devoid of brokers or bankers. However, as many cryptocurrencies continue to rise in value, people are becoming anxious about the fact that they are the only ones who have access to their digital investments. The system’s high-security also means investors could easily get locked out and lose their fortune.
A recent report by Chainanalysis—a blockchain analytics firm shows that about 3.7 million of bitcoin hasn’t been moved for over half a decade, meaning this amount could be lost already, and may never be moved again.
Another problem is that cybercriminals have developed a serious liking for cryptocurrencies because they are immediate and are ready cash. In this article, we’ll discuss some of the risks that come about with trading and storing cryptocurrencies and how to protect yourself and your coins.
Risks Associated with Trading and Storing Cryptocurrencies
Cryptocurrency may be the most secure way of transaction, but it comes with its own risks; for instance, users may face crypto frauds, especially those brought about by the current Covid-19 situation. Let’s look at some of these risks:
Phishing and Malware
Phishing and malware are currently on the rise as cybercriminals take advantage of the augmented anxiety brought about by the coronavirus and the inconceivable number of individuals working from home away from the usual corporate security protocols.
Phishing emails are being sent to unsuspecting people advising them on where to buy the Covid-19 treatments, protective gear, and testing kits. As the number of infections continues to rise, so do the campaigns that utilize the disease as an enticement. The victim is asked to click on a particular link or attachment that ultimately leads them to a hoax site that happens to ask for payment for the fake equipment, normally in the form of Bitcoin, or collects personal data that is later used to commit a crime.
Negligence or Loss of Private Keys
Cryptocurrencies are stored in a digital wallet, controlled only by using public and private keys. This means that if your private keys were to get lost or destroyed, you will end up losing access to your coins, which may eventually get lost. The worst -case scenario is when these keys end up in the hands of a hacker because then they can steal all your digital fortune.
Lack of Consumer Protection
The sour truth is that cryptocurrency doesn’t offer any consumer protection. A transaction cannot be undone. The only option you have after you erroneously send your bitcoin to the wrong recipient is to try and convince the recipient to return the funds voluntarily. This is because there is no mediator in a bitcoin transaction like it is with bank transfers. While the irreversibility of these transactions has no direct effect in the investing of bitcoin as an asset, it leads to the investor losing their digital fortune.
How to protect your Digital Fortune
There are several ways you can use to keep your coins safe. Here are some of them.
Store your Cryptocurrency Offline
It is advisable not to store your cryptocurrencies on an exchange, especially if you have a sizable amount. You don’t want to risk having your PC infected with a virus that may ultimately send your assets to a hacker.
Instead, transfer your cryptocurrencies and private keys to a hardware wallet such as Trezor. These USB-like devices will store your coins off the World Wide Web where they are more susceptible to hackers.
Use Strong Passwords
Your wallet and all your backups ought to be protected using very strong passwords. Use a password that is not easy to remember or crack. Most password generators will give you a password with 64 characters—a combination of numbers, symbols, and uppercase and lowercase letters. Note that the longer and more sophisticated your password, the more difficult it will be for a cybercriminal to crack it.
Only Use Trusted Secure Networks when Accessing your Wallet
Don’t let the temptation of using public Wi-Fi overcome you when it comes to your money. Only access your wallet when on networks you can trust to avoid being spied on and your funds being redirected somewhere else.
It is also advisable to only do online cryptocurrency transactions on an exclusive computer or device that doesn’t have any other account on it.
Enable Two-Factor Authentication
If you have not already done it, consider using multi-signature on all your crypto accounts. 2FA adds an extra layer of protection to your account. Once enabled, you’ll be required to enter a 6-digit, one-time password that is only accessible to you. The passwords change after every 30 seconds, making it impossible for hackers to break into your wallet/account by trying arbitrary numbers.
If you are not so sure about the security of the network you are using, it is advisable to transact anonymously using a VPN app. A VPN masks your online activity, ensuring that you are protected from eavesdroppers.
While blockchain—the technology that supports cryptocurrency, is a secure system, storing and trading in cryptocurrencies brings with it many risks that have been heightened by the current Covid-19 situation. As an investor, it is important to take measures to ensure that your online fortune remains safe and secure because if you don’t, no one will do it for you.