Everything You Need to Know About
Security in Cryptocurrency
The popularity and rapid adoption of
Bitcoin have led to a proliferation of other cryptocurrencies. Not all are
created equal—the security of math backs some, and some are based on the
centralized authority of an individual or organization. Many new currencies
were made, resulting in scams. Here's an overview that can help you avoid these
pitfalls.
What Is Cryptocurrency?
Cryptocurrency is a digital currency
that uses encryption methods to control the creation of currency units and
verify payment transfers. Bitcoin was the first decentralized cryptocurrency,
but hundreds of others have been developed, including Ethereum, Ripple, and
Litecoin. These cryptocurrencies are referred to as altcoins or alternative
coins to distinguish them from Bitcoin.
Is Cryptocurrency Secure?
The decentralized nature of these
currencies means no individual or organization can control them. However, each
cryptocurrency uses public and private keys to send and receive funds to create
an address. If you lose possession of your private key, someone else can
control that digital currency. You can take many steps to protect yourself, but
the most critical factor is keeping your key secure.
Cryptocurrency Security Tips
Here are some security tips to
help you protect your cryptocurrency investments:
Understand Your
Wallet
If you're planning to acquire Bitcoin
or other altcoins, the first thing to do is understand the various
cryptocurrency wallets. The safest place to store your private key is on a
device you control, such as a dedicated hardware wallet or a hard drive on your
computer. Online wallets can be convenient, but they're vulnerable to hackers
and other threats.
Never Share
Private Keys
Even if you're the only person
accessing your key, never share it or post it online. The more access points to
your crypto accounts that get out into the public, the greater the risk of
theft is. As an added measure, use distinct passwords for each account and enable
two-step verification when available
Back It Up
Cryptocurrency private keys are long
strings of letters and numbers. If you're using a physical wallet, like a hard
drive or a USB flash drive, protect your backups if the device is lost or
damaged. Investors can similarly protect paper wallets with waterproof and
fireproof safes.
Update Software
The biggest threat to cryptocurrency
investments is hackers, who can exploit vulnerabilities in software to steal
your funds. Be sure to keep all software on your computer up to date.
Use Two-Factor
Authentication
Typically, your private key is
encrypted and decrypted using a single password or passphrase. By requiring a
unique code to be input each time you log in, two-factor authentication
provides an additional degree of protection. This code can be sent by text message
or generated by a smartphone app, like Authy or Google Authenticator.
Be Vigilant
Although your private key is
virtually impossible to steal, you can lose your funds. If you notice any
unusual activity in cryptocurrency wallets, look. New coins are often launched
with little or no warning, and there have been several high-profile hacks of
big exchanges in the past.
Beware of
Phishing Scams
Phishing scams are an attempt to
steal your private keys. A common scam involves linking a fake website that looks
like an official exchange. The goal is to dupe you into entering your private
key and send cryptocurrency directly to the hacker's wallet. You can't reverse
the transaction even if you discover the theft after it happens. Phishing
attacks probably won't be the last attempt to steal your cryptocurrency.
Be Wary of New
Coins
A significant number of new altcoins
are the product of Ponzi schemes, pump and dump schemes, or outright fraud. For
this reason, some jurisdictions have taken action against cryptocurrencies or
made it illegal to participate in initial coin offerings (ICOs). When
evaluating an investment opportunity, use common sense and do your homework
before participating in a crowd sale or pre-sale.
Be Selective
About Exchanges
New coins are often traded at an
exchange, so you should know the exchanges where the new currency will be
available when you're considering an ICO. If an exchange is poorly designed or
is poorly maintained by its owners, it may suffer from several vulnerabilities
and open up avenues for hackers to access your information.
Don't Store All
of Your Funds on a Single Platform
It might be tempting to withdraw all
of your funds from an exchange and keep them in a wallet software or hardware
wallet if you want to participate in speculative trading. However, you risk
losing everything if the platform is hacked. Keeping some funds on an exchange
gives you access to liquidity for larger trades and the flexibility to quickly
get into and out of investments.
Conclusion
With cryptocurrencies growing in
popularity worldwide, the need to ensure the security of your funds is
essential. It's an exciting new technology, but it's not an asset for the faint
of heart.
If you want to invest in
cryptocurrencies, you should treat your wallet and private key as if they were
a typical bank account. A little information and common sense may go a long way
toward safeguarding your digital assets. Visit our blog now to learn more about
cryptocurrencies.