Perhaps calling the Bitcoin ecosystem ‘The Wild West’ is a little over the top as the environment has become a lot more secure and come a lot more into the light of the mainstream. However, its decentralized nature still leaves it open to attacks which can lead to a loss of fortune and there is almost no recourse.
However, a few simple tips and tricks can help those who are serious about cryptocurrency keep their digital currencies a lot more safe and secure. From Cold Wallets to second authentication, cryptocurrencies become a lot harder to steal if they are behind a few protective walls that users can put up.
The threats continue to grow and become more sophisticated, and they are essentially out there looking to prey on the susceptible, gullible and vulnerable. To avoid phishing scams, trojans, fake wallets and even out-and-out hacks, a couple of steps can make the world of difference.
A sense of security
Cryptocurrencies walk a delicate line when it comes to their security. They began their life in the shadow of the dark web and for that reason picked up a reputation that has stuck to this day.
However, cryptocurrencies and their inherent makeup are designed to be trustless and ultimately immutable and unhackable. They are decentralized, they are reliant on a tamper-proof public ledger and they are transparent.
However, it is not the Blockchain or the Bitcoin that is the issue; it is people taking advantage of the people and the ecosystem in which they operate. Thus, it takes a little common-sense, and a few simple measure to stay safe.
Cold cash
One of the most foolproof ways to keep digital currencies safe is to take it off the grid and remove it from the clutches of potential hackers and thieves. Hardware wallets are the answer to this.
A hardware wallet is essentially a USB stick that stores private keys and digital currency on a physical drive that is disconnected from the Internet. It is a good idea to store any significant amount of digital currency on one of these.
Storing a large amount of coins on the public-facing Internet, especially on exchanges which are honeypots for hackers, is simply inviting an attack. The only issue a hardware wallet has is that it can be damaged or lost, but at least that cannot be blamed on anyone else but yourself.
Spend small
Another downside to keeping all your hard earned coins on a hardware wallet is that it essentially becomes a vault, and thus if you are looking to spend digital currency on small transactions, it becomes a chore.
Thus, it is prudent to store the majority of your coins on cold storage, but also wise to keep a small amount, that you’d be willing to lose on an online wallet.
You can, of course, use wallets that are are interoperable with popular hardware wallets can make your setup more seamless.
When it does come to using your online wallet though, one of the biggest rules is to try and keep your private key. However, some of the bigger and more popular exchanges and wallets don’t allow this.
Stay legitimate
Another way to avoid losing your investment is to not invest poorly. There are hundreds of new ICOs popping up all the time, in an attempt to try and temp more investors, but a large majority of them are gimmicky or even fake.
The best example of this is OneCoin which markets itself as a competitor for Bitcoin, attacking $350 mln in investment, but it turned out to be a Ponzi scheme.
Stick to common sense
Just like anything, especially when it comes to being smart about money, it is important to use common sense and to do the basics right.
"We encourage all customers to take a few foundational, and free, actions to put them on a much more stable security footing," says Philip Martin, director of security at the cryptocurrency exchange platform Coinbase. "Use a password manager, use two-factor authentication, leverage enhanced security protocols for your email address."