Because the blockchain is a decentralized system, this also means that users themselves have a responsibility for safeguarding their assets. There are a number of basic steps to keep in mind such as choosing what kind of wallet to use, keeping passwords and seed phrases safely stored, and choosing only reputable exchanges to trade with.
How do you keep your crypto safe?
While the blockchain is our most technologically secure network for transferring and storing digital assets, it doesn’t mean that we should be completely carefree when it comes to safeguarding our cryptocurrency. Everyone should still do their part in making sure to protect one’s investments from scammers, hackers, and cybercriminals.
As cryptocurrency is adopted by more and more people, this also means being increasingly targeted by malicious actors. Here are a few best practices for safeguarding your crypto assets that everyone should know and apply:
Make use of a cold wallet
In crypto, you have the option to store your funds in either “hot” or “cold” wallets. The basic difference is that hot wallets are always online such as browser extension wallets or mobile app wallets, while cold wallets can be kept offline such as a USB wallet.
Hot wallets are fine, especially when they’re run by reputable companies. Hot wallets are also essential if you trade or pay with cryptocurrency frequently since it would be too much of a hassle to have to move your crypto from cold storage every time you want to use them.
But because hot wallets are always connected to the internet, this means they are somewhat more vulnerable to online attacks or phishing malware. Think of hot wallets as your everyday wallet you use when you go out. It’s not a good idea to have all your money in your everyday wallet since there’s always that slight probability of losing it or having it stolen. As a general rule, you should never keep large amounts of crypto in a hot wallet.
Cold wallets on the other hand are like safety deposit boxes which you only access once in a while. Since they’re kept offline, there’s nothing that hackers can do to get anywhere near it. Cold wallets are not prone to cyberattacks at all.
Use a separate email for your crypto accounts
When signing up for accounts for exchanges, decentralized finance (DeFI) apps or play-to-earn (P2E) games, make sure to use a different email than the one you normally use for work and personal use. Having an email address that is not associated with your Google searches is the first line of defense to make sure your account stays far away from scammers and hackers’ radars.
While it may also be convenient to just have the same password for all of your online accounts, this might not be the best idea when it comes to your crypto. If one of your accounts gets compromised, then all of your accounts might just as well be compromised too.
Make sure that you don’t use obvious passwords that people can easily guess such as birthdays or words. Longer passwords with uppercase and lowercase letters, numbers and symbols are preferred as these are so much more difficult to crack even with the best hacking software. Also, if the account offers two-factor authentication (2FA), always activate it to add another layer of security over just having a difficult password.
You can also make it a point to regularly change your password. Even though you might feel like it’s unnecessary, routinely changing your password could put you always one step ahead of anyone who might be trying to break into your accounts.
And in case you’re forgetful, consider keeping a copy of your passwords in a place that only you have access to like a notebook or journal. Unless it's with your spouse, knowledge of your password should be limited only to you.
Secure your seed phrases
If safeguarding your passwords is important, then safeguarding your seed phrases is doubly important. Unlike passwords which you can still recover or replace when you forget them, losing your seed phrase for your crypto wallet will result in a permanent loss of your funds.
Seed phrases are also often referred to as recovery phrases and are made up of a string of 12 to 24 words that are used to secure your wallet. Everytime you connect a wallet to an app or import a wallet to your browser, you would need to supply your seed phrase to be able to access your funds. But if you happen to lose them, no one–not even the wallet service provider, will be able to help you. You will be permanently locked out from accessing your funds.
And if someone else somehow manages to get your seed phrase, then it's practically the same thing as giving away your crypto. Under no circumstance should you ever give your seed phrase to anyone and under no circumstance will anyone from any company, bank, or customer support hotline will ever ask for your seed phrase. If anyone asks for it, it’s a sure thing that person is only trying to steal your funds.
Don’t fall for phishing scams
Blockchains are notoriously difficult to hack, so cybercriminals resort to hoodwinking people instead to voluntarily give their passwords or seed phrases or to trick them into clicking malicious links to download malware capable of infiltrating your devices. There are numerous instances of email or text message phishing scams that people have fallen for by pretending to be someone you know or from a company or website that you trust.
Be very skeptical of any emails or text messages from unknown and suspicious senders, especially with offers that sound too good to be true, or which sound hastily or unprofessionally written. When visiting cryptocurrency websites, always double check to see if the URL is the correct one, as there are a lot of scammers who simply make their own websites and pretend to be the legitimate one.
Only work with reputable exchanges
There are many exchanges and brokerage platforms who are looking to establish themselves as the safest choice for your cryptocurrency. A little research will be able to tell you whether an exchange has the necessary certifications and licenses to operate as an actual virtual asset service provider (VASP).
In the Philippines, trading on an exchange such as PDAX which is licensed by the Banko Sentral ng Pilipinas will guarantee compliance with local laws and regulations and add a layer of customer protection as opposed to using unregulated exchanges.
It also helps to read user reviews to glean unbiased third party opinions regarding user experience. Among other things, make sure that your exchange has responsive and dependable customer support. When it comes to your investments, you have to make sure there’s someone on the other end of the line that can guide you in case of any untoward events.
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DISCLAIMER: The statements in this article do not constitute financial advice. PDAX does not guarantee the technical and financial integrity of the digital asset and its ecosystem. Any and all trading involving the digital asset is subject to the user’s risk and discretion and must be done after adequate and in-depth research and analysis.
PDAX is a BSP-licensed exchange where you can trade Bitcoin, Ethereum, and other cryptocurrencies directly using PHP!
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