The weakest link in any technology is most often, HUMANS.
Before cryptocurrencies, you had the safe haven of the banks, government, and insurance companies if something nasty happens. You could afford to throw money anywhere, and still be able to redeem it without trouble.
With Bitcoins though, you’re dealing with a “decentralized” technology, which means you’ll be in charge of your own money.
So how do you protect your digital cash from hackers and crooks out there? Also, how do you make sure that it doesn’t get misplaced, losing ALL you’ve worked hard for?
Here are 10 useful tips to secure any cryptocurrency you’re holding.
1. Secure Your Private Keys (No Matter What!)
Private keys are at the heart of your wealth protection, which is why I placed this in the #1 spot.
A private key is a string of text that is used to open your cryptocurrency wallet. Anyone who knows this key (along with the public key) will get access to your precious Bitcoins.
Here’s the problem. People often lose or leak out their private keys to other people. They end up losing a substantial amount of money as a consequence.
Remember, no bank or trusted middleman can secure your Bitcoins/Altcoins (it’s decentralized, right?). That’s why it’s up to YOU to keep your money safe.
Bottomline, you need discipline to take good care of your digital coins.
2. Go Offline When Generating Your Keys
There are many websites designed to generate public keys, private keys, and QR codes from scratch (like Bitaddress.org). Their main application is usually to generate paper wallets or brain wallets.
Now here’s the problem. If you generate the keys while connected to the Internet, there’s a good chance that the generator will store your secret keys, which gives them full access to your coins.
To help solve this problem, the first thing to do is to save the address generator (like Bitaddress.org) in “offline mode”. Any browser has this option.
The second thing is to turn off the Internet connection before you open the tool. This ensures that no sensitive information will be captured by the website, therefore keeping your keys safe.
3. Use a Hardware Wallet for the Best Security
Hardware wallet is a cold storage device used for storing cryptocurrencies offline, thus making it 100% protected from cyber attacks.
Its size may vary from USB stick to card reader, and is designed to provide maximum security for your money. A handful of brands specialize when it comes to hardware wallets, such as TREZOR, Keep Key, and Ledger.
Tip #3 therefore, is to buy and use a nice hardware wallet, especially when you’re handling large amounts of Bitcoins.
But again, if you misplace and lose your hardware wallet, then the coins stored inside it are also GONE.
That’s why you should never walk around carrying your wallet if it has your retirement money inside. Put it in a safe but easy-to-remember place and keep it there.
I remember reading a Reddit post about an evacuee in the midst of Hurricane Irma. While everyone was escaping from the storm, the person returned to his house to retrieve his precious TREZOR wallet.
That’s how important hardware wallets can be!
4. When Using Online Services, Always Do Research
For all the newbies out there who’re using online platforms like Coinbase or Circle, make sure to do proper due diligence before trusting the site with your private keys.
In fact, any wallet company or exchange you pursue (whether it’s web, desktop, or mobile) you should research a lot first before creating an account in.
The easiest way to do this is by reading product reviews on Google. The information found there will help you decide whether to trust the company or not.
5. Don’t Fall for Hyped Up Schemes
Related to the previous tip is this one. You see, opportunists often take advantage of the cryptocurrency craze by blinding innocent people with flashy schemes and tempting promotions.
The scammer promises “instant riches” to anyone who will bite into the bait. They’ll make the ads as seducing as possible, then partner it with a success story of someone making millions with cryptocurrencies.
I know this scheme because I review online biz opps myself. My other website, The Passionate Marketer is full of reviews that tell whether a product is legit or a scam.
When you see something that’s too good to be true, chances are it is. You’ll notice them easily if the scheme involves giving out your private key to total strangers.
6. Test Out a Site with Small Transactions
Sometimes it’s impossible to be 100% confident with the website you go to. If that’s the case, then a great practice is to test the platform with small amounts of Bitcoin/Altcoin.
Familiarize the entire process of transferring money, from your personal wallet up until it reaches the intended destination. Once you get the hang of it, then feel free to scale things up.
Let’s say you want to send Bitcoins from Coinbase to Poloniex. Instead of going all out and placing $10,000 in your trading account, divide it into chunks by sending $500 or $1,000 at a time.
Remember, blockchain transactions are non-reversible. Once you make a transaction, you cannot take it back.
7. Encrypt Your Wallet as Tough as You Can
To keep hackers or evildoers from getting to your precious coins, it’s best that you encrypt your storage with a hard to decipher password.
Instead of using registered words in the English dictionary, you can mix things up by combining numbers, uppercase letters, lowercase letters, and symbols in a string of text.
The downside is, while it may be tough for outsiders to guess your password, YOU might struggle with remembering it as well. So you want to keep a backup of your password in a piece of paper, then put it in a safe place.
Also, don’t repeat passwords for different crypto wallets. Just create another one and then have a backup of it as well.
8. Use “Multi-Sig” with Your Friends
“Multiple signatures” (or multi-sig) is a security feature in which more than one person is required to open your cryptocurrency wallet.
Instead of owning just one secret key, you and your friends have to provide the missing pieces (like a jigsaw puzzle) to form the very key that opens the wallet.
This technique works if you have a circle of friends that you hang out with every day. Convince them of the benefits of cryptocurrency and make them convert some of their wealth into Bitcoins, Ether, Litecoins, or other cryptos they want.
Create a wallet altogether by using one that has a “multi-sig” feature, then agree upon how many people is required to open the wallet.
Here are some companies that allow multiple signatures:
9. Diversify Your Cryptos in Multiple Wallets
Instead of placing 10 Bitcoins in one particular wallet, why not place 2 BTC in 5 different places? Or, you can store 9 BTC in a cold wallet (i.e. Ledger wallet) then bring just 1 BTC in your hot wallet.
In the event of a wallet attack, you can at least minimize the losses as a result of spreading your coins.
The disadvantage of this, is you’ll have to manage all the wallets you opened. You need to save your account details, provide backup for computer files (as with desktop wallets), and special containers for your hardware storage.
10. Don’t Reuse Bitcoin Addresses
Every time you perform a transaction, it gets published on the blockchain. Anyone who wants to track you would simply determine patterns by looking at your transaction records.
If for some reason, you’ve been using a Bitcoin address over and over, then you’re making it easier for thieves and hackers to find you. That’s why you should NEVER reuse addresses when performing transactions with any cryptocurrency.
Go to any online exchange or wallet and observe the Bitcoin addresses they assign to you. They never reuse Bitcoin addresses when transferring funds because they shuffle them (even if they weren’t used at all).
If the platform you’re using doesn’t randomly change addresses, it’s most likely a scam.
Secure Your Coins and Your Future
If you think securing cryptocurrencies is tough work, then don’t worry, you’re not alone. I’m actually very irresponsible for my belongings, known to lose gadgets and stuff every once in a while.
However, I keep improving myself both in attitude and mindset in order to lessen the risk of doing something wrong. The reason why I know these practices is to protect myself from losing my coins once it grows big in the future.
Anyways, I hope you got some valuable nuggets from this guide, maybe a tip or two. Start applying them to really see your digital wealth grow.
Did I miss some important tips that I should add in the list? Feel free to leave some suggestions in the comments area below.