
Keeping your Crypto safe
Keeping your Crypto Safe !
As the world of cryptocurrency continues to grow, so does the potential for theft and fraud. Don’t be lulled into a false sense of security just because you store your coins in a digital wallet or a well-known exchange. Approximately 4000 Bitcoins have been lost forever due to various unfortunate circumstances, despite being stored in these supposedly safe places. (Mostly owners losing their Private Keys or Hardware storage wallets). “Reality shows that your coins can be lost or stolen anytime, anywhere, and in various ways. If you are not careful, you could lose everything! Keeping your Crypto Safe is therefore a key part of being a Crypto investor !
In this blog post, we will look at the main ways that you can lose your crypto and the best ways of Keeping your Crypto safe!
Top 10 ways how people can lose their crypto:
1. Not understanding how cryptocurrency works. Many people jump into the world of cryptocurrency without taking the time to understand how it works. This can lead to mistakes, such as sending coins to the wrong address or losing private keys. When sending coins, always double and triple check the address you are sending them to. It is a good practice to send a small amount first, so you can check that it arrives safely before sending the full amount you are planning to send.
If you do send coins to the wrong address, or use the wrong network, you run the risk of losing whatever you send. Minimise your risks by transacting small amounts initially. There are many resources available to you on-line to do plenty of research before you start. There are also videos here in the Crypto College website to help you learn before jumping in.
2. Not securing accounts with strong passwords and two-factor authentication. It is very important when setting up your Crypto accounts, to use strong passwords and two factor authentication (2FA). Two factor authentication is an extra layer of security. It is an additional step to logging in, as you will need to enter a code that is sent to your phone or email. But it is worth the effort in order to add to your security.
An extra note on Passwords:
Use a strong password for all your online accounts, including your email account and any exchanges or wallets that you are using. A strong password should be at least 8 characters long and should include a mix of uppercase and lowercase letters, numbers, and symbols.
Password tips
Avoid using easily guessed words like “password” or easily accessible personal information like your birthdate. If you struggle with generating and remembering strong passwords, then there are some 3rd party apps that can help. Remember that hackers can also create fake sites that offer password safety. Make sure you do your due diligence and check on the authenticity of any 3rd party app you are thinking of using use before you start.
3. Not backing up your wallets.
If you only use your phone as a wallet and lose it or accidentally delete the wallet, you will lose all your coins forever unless you have backed up the wallet. It is therefore important to backup your wallet on a regular basis and to store the backup in a safe place.
The best way to back up your wallet is to use a hardware wallet. This is a physical device that stores your coins off-line. This is known as ‘Cold storage’ and is the best way to store your coins, as it is off-line and out of reach of hackers. Three examples of hardware wallets that can store your Crypto currency off-line are the Ledger Nano S, the Trezor, and the KeepKey. Remember though, it is important to do your own research thoroughly when determining the best solution for you.
4. Using exchanges as wallets.
Many people use exchanges as their primary storage for their coins, but this is not necessarily a safe practice. Past hacks on exchanges show the potential for future hacks. If you use an exchange, only store the amount of coins you are actively trading on it and store all other coins in a secure cold wallet that you control.
5. Falling for scams.
There are many scams in the world of cryptocurrency and it is important to be aware of them so that you don’t fall victim to one and run the risk of losing some or all of your coins. Some common scams include Ponzi schemes, fake ICOs (Initial Coin Offerings), and phishing attacks.
Let’s quickly look at each of these:
Ponzi schemes
Ponzi schemes promise high returns with no merit and only the creators make money. Investors get lured in by the attraction of high yields. Whilst it is not always clear of the outcome of any investment, you should always seek to thoroughly research any projects that offer what seems to be too good to be true returns. Always do your due diligence on the sustainability of the project and the team that are behind it and also make sure that you know the risks.
Fake ICO’s
Secondly, fake ICOs, these are where fraudsters create a fake cryptocurrency and try to sell it to investors. Remember this is a decentralized blockchain and so you will own the outcome with no recourse if you fall into the trap that has been set. Be sure to do your research on any ICO before investing and remember, that if something sounds too good to be true, then it probably is!
Phishing
Phishing attacks are when hackers send emails or create websites that look like they are from a legitimate company in order to try and get you to enter your personal information. They may even go as far as creating a fake wallet in order to get you to transfer your coins to them. Again, as with all other scenarios where there is a risk of the authenticity, make sure that you do your research before investing in anything and be sure to check out reviews from other users before going ahead.
Always, double and triple check the sources and validity of any entity that you are considering investing in or transacting with when dealing with the decentralised world of Cryptocurrency.
6. Losing your private keys. This is one of the most common ways people lose their crypto. Private keys, like unique passwords, give complete access to the funds they protect, so handle them with care. If you lose your private keys, then you will lose access to your coins.
Your Public key is similar to your Bank account number. When someone sends you money, they need those co-ordinates to do so. Your private key is basically your pin code. That is something you should never share with anybody and always keep safe. Unlike a Bank, where you can request a new PIN if you forget your old one, with Crypto, if you lose your Private key, then you have no way of recovering or replacing it.
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What are the different ways to protect your keys?
Individuals and institutions have a few different options for keeping private keys away from prying eyes. Hot wallets, which are connected to the internet, and cold wallets, which are off-line and come in two forms, paper and hardware. Both hot wallets and cold wallets help protect your private keys.
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Paper wallets:
Paper wallets were the first form of key storage for Crypto. People first started to take private keys off personal hard drives and print them out. “A paper wallet makes private keys unhackable by taking them offline, but safe use requires expertise as a small mistake can expose the keys or cause permanent loss. If you lose the paper or it gets destroyed, you will lose access to your crypto..
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Hardware wallets:
Hardware wallets are a modern form of paper wallets, which rely on the same basic principles. But instead of being written on paper, the private keys are encoded into a chip that remains off-line. When you want to manage your funds, you can plug the wallet into your computer to sign transactions with the private key. This makes hardware wallets easier to manage than paper wallets, but they still have their vulnerabilities. Hardware wallets can be lost, stolen, broken or corrupted. And, you still have to write down the seed words as a backup on paper, which introduces all the additional risks of a paper wallet.
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Hot wallets:
A Hot wallet is any wallet that is connected to the internet. Most people’s day-to-day wallets will be hot wallets, as they need to be online to manage and spend their crypto. Hot wallets are usually easy to use and provides a good level of security for small amounts of crypto. Hot wallets are centralized and secured online, making them vulnerable to hacks
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Multi-signature technology:
One way to make a hot wallet more secure is to use multi-signature technology, which requires multiple people to sign off on each transaction. This makes it much harder for hackers to steal your crypto. Some examples of multisig solutions are BitGo and Armory.
7. Transferring to a Wrong Address. Many people would not consider transferring Bitcoin to a wrong address as a common way of losing one’s Bitcoins, but it actually is. A single character is all it takes for your Bitcoin to end up in the account of a stranger. Since Bitcoin transactions are completely irreversible, sending coins to the wrong address, means losing them forever. (Unless you send it to a person kind enough to refund). The best method of inputting an address is by copying and pasting the address of the receiver. After that, double-check the address to make sure you haven’t accidentally typed in an extra character. If you want to add another layer of safety, then send a small amount first and check the co-ordinates are correct and the transaction arrives safely.
8.Fake Cryptocurrency Wallets. Another route fraudsters take is to create fake wallet apps and list them on Google play or other App stores. Sometimes, they come as new projects, other times they mimic real cryptocurrency wallet apps. Their purpose is to get your credentials or steal your crypto.
If you download these fake apps, they request your wallet passwords and private keys. The fraudsters on the other end then proceed to withdraw crypto from the real wallets. Sometimes they even go as far as allowing users to deposit but not to withdraw before they steal your coins. So, be very careful and do your due diligence!
9. Pump and Dump Schemes. If you have been around the crypto space for even a short while, then you may have experienced or heard of ‘pump and dump’ schemes. These are basically price manipulation schemes, where cybercriminals or paid ‘shillers’ take to social media groups to hype up projects or tokens.
In themselves, these tokens and projects have no real value or real use-case. Because of the hype and investments from the public, the coins experience exponential increases in value overnight. It is easy to fall into the trap of thinking you are missing out on the next big growth opportunity. However, once the value increases, the fraudsters sell their tokens, and soon after the massive sell-off, the token price plummets.
People who keep their tokens in Pump and dump schemes can end up with almost valueless coins. An example of a recent major pump and dump scheme was with a project called Bitconnect. Bitconnect (BCC). This was an open source cryptocurrency that was connected with a high yield investment program (a type of Ponzi scheme). The platform administrators closed the earning platform on January 16, 2018, and refunded the users’ investments in BCC following a 92% coin value crash. Confidence was lost and the value of the coin plummeted to below $1 from a previous high of nearly $525.
To avoid falling for these schemes, do your own research on projects and tokens before investing. Do not take the word of strangers on social media groups.
10. Bad Practices. We all fall foul to bad practices when using our Computers on a day to day basis. This can lead to viruses and hacks that can lead to identity theft, fraud and loss. Here are some good practices that you should adopt when it comes to security of your computer.
- Use a separate computer, or at least a separate user account, on your current computer for all cryptocurrency activity. This will help to keep your crypto activity isolated from any other activity on your computer which could potentially lead to infection by malware.
- Keep your software up to date. This includes your operating system, browser, and any wallets or other software that you are using for your crypto activity. Hackers can exploit security vulnerabilities in outdated software, so use a good antivirus program and keep it up to date. This will help to protect your computer from malware which could potentially steal your private keys or otherwise compromise your security.
- Use a VPN: When you are accessing cryptocurrency exchanges and wallets, it is important to use a VPN. This will encrypt your traffic and help to protect your coins from hacking and fraud.
- Be cautious of any emails, links, or attachments that you receive, even if they appear to be from a trusted source. Hackers often use phishing attacks to try and trick people into revealing their private keys or other sensitive information. If you are ever unsure about the legitimacy of an email, link, or attachment, it is best to err on the side of caution and avoid opening it.
Summary
In summary, there is a lot to think about, but there again, there is a lot at stake! Be smart, tread carefully and always do through due diligence before taking any investment decision. It is also important to follow best security practices to keep your Crypto and your computer safe from hackers.
Would you like to join our community to share and discuss your research, views, and experiences before investing in crypto? As a new investor, it’s a great way to gain insights from others who have walked the path before you. Sign up today and join our Crypto College Community to benefit.
Good luck and see you back here again soon!
Jack
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