When Bitcoin and other cryptocurrencies emerged, they changed the way many of us think about and use money. Although the security of these digital assets is generally pretty good, the system is certainly not infallible. Hackers are experts at accessing all things digital, and crypto is no different. In this article, we’ll tell you all about the things you should be doing to ensure the security of your digital assets.
Keep private keys out of cryptocurrency exchanges
When you get your digital wallet, you’re assigned alphanumeric codes. These are your keys. Each wallet has two keys: public and private. Finance experts will tell you not to leave your private keys with anyone else or in another wallet. These keys should only be the property of the wallet owner and should never be provided to a company or exchange that doesn’t have firewalls between its trading, custody and liquidity services.
Of course, many vendors will have adequate firewalls to protect your funds and information. They also often have the ability to reduce risks with their technology. Remember, if private keys are lost, you can never recover them and access your coins. Even if you find the best crypto South Africa has to offer, it’s irrelevant without that key.
Use multiple wallets to spread out crypto investments
Let’s say you’ve invested $50,000 in a cryptocurrency. It’s a really good idea not to keep it all in one wallet. This is because if a hacker does succeed in attacking your digital wallet, they’ll be able to access your entire investment. If fraud is successful, you’ll lose everything. To mitigate against this, spread your investments between multiple wallets.
This will reduce your risk considerably. If one wallet is breached, the hacker won’t be able to access the funds in the other wallets. In addition, always make sure you have strong passwords that are different on all your wallets. It’s also a good idea to read up on how crypto scams work so you can protect yourself further.
Cold and hot wallets
There are two types of wallets for storing cryptocurrency: cold and hot. The different types of wallets have different features. For example, they often feature different accessibility and security. Let’s say you have $50,000 to invest in crypto. You might not want to trade the entirety of your investment. Depending on the strategy and the size, you might trade somewhere between 2-5% of your existing portfolio. In this case, you’d choose a hot wallet to store any cryptocurrency you plan to trade and then keep the rest in a cold wallet, in other words, one that is offline and provides security for digital assets.
Strategies to further reduce risk
There are huge risks with cryptocurrencies and trading or investing them. Anyone who takes part in this should have a risk-management strategy in place. You also take risks with any transaction you make with cryptocurrency too.
A risk management strategy will help you to avoid making mistakes. Any mistake means a hacker could try to corrupt your digital wallet, which can lead to you losing your assets. Every step, therefore, should be taken with caution. You might fail sometimes, but as long as you keep your wallets and private keys secure, you will keep risks as low as they can be.
Secure assets with due diligence
Every trader or investor needs to understand the environment of security surrounding cryptocurrency assets, whether this is in-house or through a third party.
Hire a vendor to protect your assets
When you hire an appropriate vendor who has experience with financial positions, specialty controls, infrastructure and safeguarding, you’ll be exposed to less risk. Good vendors will focus on anti-money laundering (AML) and know your customer (KYC) and ensure appropriate checks are made. Choosing a vendor with appropriate training is important if they’re going to succeed in safeguarding your cryptocurrency assets.
Look after your digital assets and keep an eye on the latest security trends
Though crypto is still new and evolving, hackers are quick to learn how to manipulate new systems. While they do sometimes get caught, there’s no guarantee you’ll get your lost funds back. For this reason, it’s important to keep up with best practices to secure your assets and prevent losses. Using hot and cold wallets, splitting funds into different wallets with different passwords and keeping your private keys secure means you’ll be dealing with less risk.
