Last Updated on November 12, 2021 by Diana Kelley
The cryptocurrency does not appear to be going anywhere, and although some countries, such as China, have banned its use, many developed countries, including the United States, are more relaxed about its existence. It is very important to be able to protect your virtual funds.
Some large organizations already accept crypto payments for products and services.
Explicit benefits for virtual funds sellers:
- Crypto transaction fees are typically lower than the 2-3% charged by credit card processors;
- Digital assets do not leave behind any information that can be used to steal an identity.
What affects the security of cryptocurrency?
Besides the financial benefit, several elements protect crypto assets from theft:
- Cryptography controls the creation and transfer of cryptocurrency, and the protocols underlying bitcoins are reliable;
- Bitcoin’s use of a distributed ledger, known as the blockchain, gives owners a record of all their transactions that cannot be faked because there is no single point of failure from which access can disrupt the system.
However, this did not stop attackers from exploiting vulnerabilities in bitcoin exchanges or wallets: software used to store bitcoins on computers or smartphones.
A cryptocurrency exchange is not regulated by the state. It does not provide the same insurance and security as it does for storing fiat money in banks. Unsurprisingly, as the value of bitcoin increased, so did the number of viruses designed to steal bitcoins from wallets.
This trend continued in the future. There have been several cyberattacks on exchanges and wallets as the price of cryptocurrencies has skyrocketed in recent months. Also, new threats have emerged in the form of crypto mining malware attacks.
Despite the rise in cyberattacks, cryptocurrency wallets are still one of the best ways to protect bitcoins. Ideally, more secure cold wallets are separate devices. They usually look like a USB stick or keychain.
Crypto wallets are used to store cryptocurrency. In a nutshell: hot and warm wallets are software. They require an Internet connection and allow you to quickly use funds for trading, but it is precise because of the Internet connection that they are more vulnerable to hacking. To increase their security, be sure to enable two-factor authentication. Then it will be more difficult for criminals to get into the vault without your knowledge.
Exchanges for transactions provide users with hot wallets, but it is not worth keeping all your funds on the trading platforms that are constantly at the crossroads of cyber groups. It is wise to keep on your balance only the amount that you plan to work within the near future, and the rest of the assets are safest to be sent to a cold wallet.
This ensures that the operating system is virus-free, does not cache, register, or store wallet keys anywhere. Users should treat their software wallet in the same way as they would with a real wallet.
And also save all passwords and codes that you see when creating and using the wallet. For your safety, the developers of many wallets show them only once. You can even write them down on paper if you are sure that you will not lose it or the children will not paint a couple of masterpieces on top, but better in a secure vault, for example, in a password manager. Remember: if you forget such a key, you will no longer be able to restore access to the money.
As we said, it is best to use two wallets:
- Store only a small amount of bitcoins on a computer or mobile phone for everyday use;
- The main balance must be kept in a separate offline wallet.
This protects most of the user’s bitcoins from malware trying to intercept the password used to access the storage or find unencrypted wallet data in the device’s RAM.
An offline wallet must be physically secure. Perhaps even placed in a traditional bank vault, as losing or stealing it means the irrecoverable loss of the bitcoins it contains.
An unfortunate example is a case when a computer hard drive containing more than $4.6 million worth of bitcoins was thrown into a trash can by James Howells and was effectively lost. The owner simply forgot that the disc contains 7.500 bitcoins.
Offline or cold storage services are available, but please note that these are not regulated by the financial services industry. Also, if the offline wallet is encrypted, it’s important not to forget the passphrase. Some experts prefer not to encrypt this type of wallet, since, in the event of death, descendants will not be able to access the inheritance.
Observe sound security procedures
The most crucial thing you should do is make a backup of your keys. Never give out your seed words or type them into a device that isn’t yours.
When it comes to digital wallet protection, take a hybrid approach
Yes, we will mention it twice. Online wallets are becoming increasingly common, attracting the interest of hackers. The bulk of a consumer’s cryptocurrencies should be stored in offline or physical accounts, with just a limited portion kept in an online wallet.
Keep the secret key to yourself
The secret key is used to verify that the person sending or receiving the digital coins is the wallet’s owner. Cold storage is the best place to store your private key. Printing out the key and erasing any digital evidence of it is what cold storage entails. Holding this term anywhere digital is very dangerous, given how quickly criminals can gain access to end-user computers and other digital storage applications.
The use of two strong passwords is important
Never use the same password for multiple accounts, particularly because cryptocurrency services are a popular target for cybercriminals. Limit the exposure by using a different, strong password for each, preferably with two-factor authentication and password rotation. Using a reputable password manager will assist in automating this method and eliminating the guesswork.
Okay, CoinRabbit. How can I ensure the reliable security of my virtual funds?
So, there are several ways:
- Regular backups of your Bitcoin wallet are essential to protect against computer crashes, theft, and human error;
- Never store this information on the Internet, especially if the backup is not encrypted;
- Always use the latest bitcoin software and a password of at least 16 characters;
- Although crypto is a purely digital currency, it can be stored in analog form. For this, paper wallets are used offline, which significantly reduces the likelihood of cryptocurrency theft by hackers or computer viruses. Printing the contents of the wallet the private keys and their corresponding public keys creates a physical record, which of course must be kept secure.
It is important to understand that the currency in a crypto wallet is not the same as ordinary money in your pocket. Your wallet is, in fact, just two keys, it does not contain any money. Digital money itself is on the blockchain and never leaves it. When they are transferred from wallet to wallet, only one action occurs: only another block is added to the blockchain with a description of this transaction.
Securing crypto is difficult and time-consuming, but worth the effort for anyone with a reasonable amount of decentralized digital currency. Crypto is more than a passing internet craze. When specialized hardware wallets hit the market, they will surely provide the best balance between security and ease of use.
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