How to Protect your Crypto

How to protect your cryptocurrency investments?

While cryptocurrencies offer secure and private means of investment on one hand, on the other hand, there have been reports of cyber-attacks, mishandling, and theft in large numbers over the past years. Recently, the founder of a crypto exchange QuadrigaCX died, leaving his clients with a serious financial loss. His wife reported that the passwords to the cold storage of the crypto-currencies were not known to anyone except Gerald Cotton, the founder. In other events, investors have been robbed of their crypto-tokens, while a huge amount of cryptocurrencies have been swept off of the exchange’s network through cyber-attacks. Now that the cryptocurrencies are not regulated by any central body or a government entity, taking legal actions wouldn’t be of much help to the victims of any such attacks that leave them with loss.  Also, it is easy for hackers to digitally remove the footprints of the transactions, which means that the whereabouts of the tokens cannot be tracked. In such conditions, the investor himself should exercise some precautions to protect his investments.

1.     Use wallet services from credible sources

A cybersecurity company, Moss Adams, has let the public know that recently a number of wallet services have been launched into the markets from less reputable companies, which could potentially be malware in disguise. They recommend that clients who use Cryptocurrencies should use regulated and reputed wallet exchanges because they have been tested and often have better standards of safety implemented on their network. Alex Hamerstone, a management lead at TrustedSec says that most of the companies operating within this sphere are mostly new startups and that their security mechanisms are not audited and regulated by financial entities.

In view of the case with QuadrigaCX, a senior market analyst at eToro, said that, “QuadrigaCX was facing liquidity issues for months and anybody who did even a minimal amount of research online would have seen this”, hinting about an internal scam that might have happened instead of a natural tragedy (Chang, 2019).

2.     Research about other available options

There are different kinds of wallets out there in the market, each with its own set of pros and cons.  Options that you have to pick from include hardware, software and paper wallets. Each wallet uses some information like a password or a verification key that is encrypted to authenticate the user. While software wallets are still susceptible to cyber-attacks, hardware wallets are generally considered to be more secure. However, if the password to a wallet is forgotten, or the wallet is lost, there’s no way to recover it. Therefore, extra care should be taken while choosing a password to keep your wallet in safe storage.

3.     Cold Wallets

Cold wallets are devices that are used to store crypto-tokens offline, away from the network. This provides a solution against the cyber-attacks that have been increasingly witnessed on different exchanges and storage platforms. Devices like USBs and hard drives are used to store the crypto-tokens, which means that your tokens are removed from the online network. A very common way of hacking is to record the keystrokes of the users while they are logging into their safe accounts. Using offline devices removes the threat against this type of hacking as well.

4.     Don’t put all your eggs in one basket

This point is very similar to the most common financial advice i.e. do not invest all your money into a single asset. Likewise, do not store all your crypto-currency investments in a single storage platform or wallet. A senior financial analyst advised that, “Should an exchange be lost for any reason, you can protect your investment and minimize the impact of any loss by spreading out where your currencies are stored and how you’re managing them.” Although it is more time-consuming and might become troublesome to keep track of every storage, it is more secure in terms of risk management.

5.     Use stronger authentication

A very common practice among the community at large is that they often have the same password for every social platform that they are using. Chris Morales, head of security at Vectra, says that simple typical passwords that get used on social platforms should be avoided as the passwords for different storage sites. People should generally be using stronger password mechanisms, like two-factor authentication or multi-signatures. This will greatly reduce the chances of fraud and hacking.

6.     Create back-ups

It is a very common occurrence for investors to forget the password to their storage platform or devices, and thus lose considerable amount of investments at one point or the other. The solution to this problem is to be redundant. Create backups of your private keys, both online and offline, so that if one storage gets compromised or fails, you do not lose all of your money.

7.     Use stronger passwords

Hackers use very sophisticated tools and techniques that can easily disclose your account password if they aren’t strong enough. It is recommended to use passwords that do not contain any common phrase or set of alphanumeric. Some password generators can provide you with 64 character long passwords, which contain a lowercase, uppercase, alphanumeric and special characters. These passwords are very strong and cannot be remembered or cracked easily. The stronger your password is, the longer will it take to crack it.

8.     Use trusted secure networks

Financial advisors strongly recommend using only private networks and dedicated devices for operating storage platforms. Using public Wi-Fi networks and all-purpose PC may seem like a thrill at the moment, but you will only be attracting more problems for yourself, as malware can easily be injected on to your network that can track all your activity. The use of public devices can result into greater risk.

9.     Do not publicize your investments

Social media discussions and dedicated forum posting have become very common on topics related to cryptocurrencies. People usually post about their experiences, their gains, and losses, their personal opinions on the use of different platforms. Outwardly, this all looks normal and helpful for the general community, but this could pose a risk to the investor who is sharing such information. Hackers actively search forums and social media accounts to find potential investors so that they can be targeted with full force. Given such conditions, it is best not to talk about your investments on online forums.

10. Do smaller trades

Bigger trades put you on the radar of the hackers and cyber-criminals, as you can be a potentially wealthy investor. Hackers find such investors to attack so that their dedicated efforts can yield higher returns.  Always spread your trade across every platform, and trade in small volumes so that you appear as a normal investor.

With all these points in mind, you could also try to minimize or wholly avoid losses through cyber-attacks, forgetfulness and device failures. The key is to be pro-active rather than being reactive, because as they say “Precaution is better than cure!”

References

Chang, E. (2019, February 18). USnews. Retrieved from USnews: https://money.usnews.com/investing/cryptocurrency/slideshows/ways-to-keep-your-cryptocurrency-safe?onepage