How To Protect Your Crypto

Crypto holders, be warned. From being a victim of a hack, to forgetting your complex passwords, there are several ways you can lose your cryptocurrencies forever if you’re not careful. Here are five ways to protect your funds.

Cold Wallets

Hacking events have gone viral for all the wrong reasons ever since the birth of Bitcoin. In 2019, Korea-based cryptocurrency exchange Upbit lost 342,000 Ether when the exchange’s hot wallet was hacked. In 2020, KuCoin suffered a US $150 million crypto hack after cybercriminals stole the private keys to their hot wallets. Hong Kong cryptocurrency exchange Bilaxy suspended its website after a US $21 million-dollar hack just last month. To reduce the chances of being a victim of hackers, transfer your cryptocurrencies from your hot wallet (online wallets) to a cold wallet (offline wallets). 

Unlike exchange, mobile or desktop wallets, which are frequently targeted by hackers as they are connected to the Internet, offline wallets like hardware wallets or paper wallets are highly resilient, if not completely immune to, hacking attacks. To minimize the risk of losing your funds, avoid using any kind of wallet that is connected to the internet to store your cryptocurrencies. 

Hardware wallets are significantly less convenient than hot wallets because they are not actively connected to the Internet, and unlike many hot wallet options, they aren’t free. However, because they were designed to be immune to hacking, cold wallets are, in general, more secure as compared to their Internet-connected counterparts.

In fact, immediate actions taken by exchanges following a hacking event often include the suspension of all asset withdrawals, the suspension of the website altogether, and the swift transfer of crypto assets to cold wallets and other cold storage options. If you aren’t frequently trading your crypto, why not do the same and transfer your assets to cold wallets to avoid being a victim of hacking?

Password Manager

When it comes to passwords, having unique, random passwords that are complex enough to hinder hacking is definitely the way to go. The best, most unhackable password manager is your brain, but can you really remember complex passwords like Qs):uFb*Mk3Axzag, for all your accounts? 

We have all been guilty of this at one point of time or another. Using passwords that are practically defenceless against hackers, reusing passwords, forgetting and recording passwords down online without encryption are all no-nos for cryptocurrency. However, relying solely on your memory proves difficult, as one such individual who forgot the password to his US $220 million-dollar crypto fund realized the hard way. To prevent situations like losing access to your funds or being compromised by a hacker, one can use password managers to help them store and manage all of one’s online passwords in a safer way. 

Password managers can prevent situations like that by generating unique, complex passwords, encrypting and storing those passwords so that you do not have to remember all of them. A master password is often used to access the library of passwords stored, so one would only need to remember one single password. Just remember to set a master password that is randomly generated and long enough to increase security, and of course, remember that single master password.

 

Two-Factor Authentication

For an extra layer of security, many people turn to the two-factor authentication (2FA) feature. You’ve generated the most complex password imaginable and have backed it up with your password manager. To take your security to the next level, some people activate 2FA so that a hacker has to get their hands on your password as well as a secondary confidential piece of information to access your funds, making it more difficult for people who have unauthorized access to their passwords to also obtain access to their funds. This secondary confidential information can come in the form of a set of random, unique numbers generated on the spot, biometrics password like a fingerprint password, or even a secondary password sent to your smartphone via your email or messaging platform.

The 2FA feature is also widely used by non-cryptocurrency service providers, and trusted by companies like Apple, Amazon and Microsoft. A 2019 study by Microsoft also affirmed that the 2FA feature can block 99.9% of automated attacks, making it a reliable security feature.

There are many 2FA apps that can support your need for security.  Most exchanges also provide the option of activating 2FA, so check if the exchange you are using can enable the security feature. 

 

Reputable Exchanges

With hundreds of crypto exchanges offering thousands of digital assets, crypto investors and traders have a wide variety when it comes to buying on a platform. However, this also makes selecting a reliable exchange more difficult. With exchange frauds, hacking, closure and other worrying events, crypto holders should be prudent when choosing a platform to use.

In June this year, four executives of V Global, a now-defunct crypto exchange, were arrested on fraud charges. Approximately $3.5 billion and 69, 000 victims were involved in this multi-level fraudulent scheme, with an estimated 30, 000 victims allegedly unable to get their money back.

As new rules around cryptocurrency are introduced to improve investor protection, regulators around the world are seeking tighter control. In South Korea, crypto exchanges are due to shut down en masse by 24th September 2021, save for four platforms who managed to show compliance by securing bank partnerships and relevant certification, The Financial Services Commission also warned investors to withdraw assets before the closure or face possible loss.

To protect one’s crypto, one should do more research about the country’s regulatory stance regarding crypto, as well as the exchange itself. Check if the exchange is transparent and offers information like its physical address and license(s), if any, its general reputation over the years, the safety features the exchange provides, and whether the exchange has a good compliance protocol to prepare for the new regulations around crypto, blockchain, and digital assets. While there is no sure-fire method of picking the safest and most secure platform, it is definitely worth evaluating the platform with details as mentioned before entrusting your funds to any exchange.

 

Risk Monitoring

If you are using an exchange that does not regularly enforce compliance yet, you may want to take your own precautionary actions. Investors can run a quick scan to check if someone else’s address is associated to any unsavoury entities, and even do the same for their own past transactions.  This not only prevents you from being implicated in a potential crime facilitated by cryptocurrency, but also allows you to have a peace of mind if you do decide to migrate to a crypto exchange that is compliant, be it on your own accord or because of evolving regulations in your country. With the clamping of regulations, it is also likely that exchanges will start to conduct their own risk assessment in order to meet compliance obligations. In fact, there have been instances where accounts were frozen due to the discovery of coins that were flagged to be associated with blacklisted entities. To avoid account freezing and fund-seizing in the name of investigations, you can run a scan using BitRank Verified®, a one-click scan to monitor your cryptocurrencies and third-party addresses.

BitRank Verified® is a blockchain intelligence software that provides fast, easy, and reliable real-monitoring and scoring of transactions and wallets to make sure your cryptocurrencies are clean. Its one-click background check allows crypto holders to generate detailed intelligence reports, empowering everyone with insights to manage their cryptocurrencies wisely. Reports come with a summary of the background check, as well as a BitRank Verified® score (with 0 reflecting the highest risk for being blacklisted and 100 being the lowest) for a snapshot of your crypto’s status. 

While the introduction of regulations supporting crypto investor protection bodes well for investors, you should remember to always stay prudent when guarding your crypto and minimize the risk of losing your assets with these simple, yet effective steps. Try out BitRank Verified® risk monitoring here.