Cryptocurrency has surged in popularity over the past year, and it’s not hard to see why. It allows investors to maintain control of their money while benefiting from blockchain technology and smart contracts. But it’s important to remember that crypto isn’t without its flaws. Not only are there security risks involved with buying, selling, and storing your crypto, but it’s also susceptible to scams and hacks. If you have poor crypto management, those can cost you thousands or even millions of dollars. Fortunately, you can take steps to avoid scams and protect your assets from hackers — here are some of the most important ones.
Don’t let cloud services near your crypto
If you’re not already aware, there are a lot of risks associated with keeping your crypto in a cloud-based service. If someone hacks the service, they could get your information. Even if no one hacks the service, there’s always the possibility that an employee could gain access to your account and take your crypto. Let’s not forget many of the most significant early crypto heists involved someone with inside access.
In early August 2022, Cameo co-founder and CEO Steven Galanis had over $200,000 stolen in crypto assets. The thieves could access his account because he backed up his wallet’s seed phrase on iCloud. Galanis’ misfortunate incident is a top example of poor crypto management. As we’ve covered before, a seed phrase is one of the most crucial crypto security features. With your seed phrase, you can reset your crypto wallet in any new wallet if you lose the original.
While cloud services can be convenient, they are also vulnerable. You want to keep your crypto keys and passwords far from any hackable storage. If possible, write your seed phrase(s) down a couple of times and keep them somewhere safe.
Don’t leave crypto in your exchange wallet
Hackers aren’t the only ones that might take your crypto. In light of the recent string of crypto exchange bankruptcies, we’ve found exchanges may keep your crypto too. The dust hasn’t settled from ongoing bankruptcy filings, so we still don’t know exactly how things will play out. The fact that this is all happening before crypto regulations are clear or established only complicates matters. While centralized exchanges can be convenient for trading and storing crypto, they’re not infallible.
Knowing that you might lose some of your assets if the exchange goes bankrupt is unsettling. To avoid this, you can move your crypto from exchange wallets to hardware wallets. Hardware wallets, a.k.a. cold wallets, are physical USB wallets. There are several brand options available, Ledger being one of the more popular. You might even want to get a few hardware wallets to spread your crypto to be safe. If you’re worried about potentially losing a hardware wallet, remember: you can always restore it in a new one with your seed phrase.
Use two-factor authentication
Whether you get a hardware wallet or not, you should there are other crypto management practices you can include. Now is a great time to start if you’re not using two-factor authentication (2FA) to protect your online accounts. 2FA adds an extra layer of security by requiring you to enter a code from your phone in addition to your password. That makes it much harder for hackers to access your account, even if they have your password.
Use multi-signature wallets. A multi-signature wallet uses multiple keys so that no one person can spend the funds without another’s signature. Add an additional layer of protection with biometrics: Multi-signature wallets can also use biometrics instead of a key, preventing unauthorized people from accessing them. Again, keep a backup in cold storage: avoid storing all your crypto on one device.
Always confirm who you’re trading with
Before sending any crypto to anyone, always confirm that you are sending it to the correct address. Many scams will try to get you to send crypto to the wrong address, and once it’s gone, it’s gone for good. Take the time to double-check addresses, and if possible, use a service that will confirm the address for you. If you need practice with the process, you can try sending crypto from one of your wallets to another. Doing that will familiarize you with the process and help you spread your crypto.