Let’s face it, securing your assets is probably one of the least sexy things to talk about in this ecosystem. With everyone looking for the next 100x investment or discussing the coin with the quickest transaction times and smallest fees, it’s easy for the security of your assets to be pushed by to the wayside. You (yes you…the reader) are your greatest defense when it comes to the security of your cryptocurrency. Our team has provided a list of suggestions for protecting your assets across a variety of storage solutions.
Storing your cryptocurrency on an exchange is probably the most unsafe method for storing your cryptocurrency. With exchanges, users don’t actually own their cryptocurrency or hold their private keys. You can think of storing your assets on an exchange as similar to holding fiat currency in the bank. The amount that shows in your account is virtually an IOU given to you by the bank or exchange. While banks have federal regulations in place to ensure your money doesn’t randomly disappear, the same can’t be said for cryptocurrency exchanges. There is a history of hacking, insolvency and glitches on cryptocurrency exchanges that allow users to lose their assets in the blink of an eye. The Mt. Gox saga immediately comes to mind here for experienced users of the space as 850,000 Bitcoin were stolen from the exchange from 2011-2014. Even more recently (January 2018), a Japanese exchange by the name of Coincheck had $500 million USD stolen from their digital safe.
While successful hacking attempts are rare on the top worldwide exchanges, there are still a variety of methods where hackers can socially engineer their way into your account. If you do decide to keep your funds on an exchange (we don’t recommend this), 2 Factor Authentication or 2FA is your best bet as it provides an additional layer of security where a code is needed that can only be acquired from an authorized phone on your account. We suggest using Google Authenticator or Authy for your 2FA needs. The SMS 2FA option is not recommended by our staff. Day traders in the space seem to have found a happy medium where they will have a majority of their funds stored away in a private wallet while keeping their funds specifically for trading on the exchange. As we move forward in the article, we can’t stress the following fact enough -- YOU ARE YOUR GREATEST DEFENSE WHEN IT COMES TO THE SECURITY OF YOUR CRYPTOCURRENCY.
Cryptocurrency Wallets
While there is a slight learning curve when setting up a wallet of your own, you will have better peace of mind in knowing your cryptocurrency is secure. You can compare owning a paper wallet to being your own bank. You have total access to your funds and can do with them as you please, whenever you please. With your own wallet, you will now have access to your private keys, which give you total access to your account. As the name suggests, your private keys should remain private, should not be given to anyone under any circumstance and should also be stored in a safe and secure location. If your private keys go missing, unfortunately there is (at this time) no way to truly recover your funds.
There are a large variety of wallets available, whether it be a paper wallet, web wallet, or hardware wallet. Some wallets will hold one single type of cryptocurrency while others will hold a variety of cryptocurrencies, so it is best to research the wallet that fits the needs of your portfolio. For readers with an Ethereum and ERC-20 heavy portfolio, MyEtherWallet is one of the better client based web wallets available which is free of cost. For readers willing to spend a pretty penny or two, the Ledger Nano S is a safe and secure hardware wallet that supports a variety of popular cryptocurrencies and ERC-20 tokens.
Due to the fact that cryptocurrency is a digital asset, hackers are always sure to be lurking to take advantage of inexperienced users in the space. It is recommended that our readers continue following the latest trends in the security of your funds. We are more than happy to provide additional insight if requested below in the comments section.
Happy investing!
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