The cryptocurrency market reached enormous heights last year, with Bitcoin almost reaching the $20,000 price mark. Now, the whole market is estimated to be valued at more than $130 billion, and it’s still rising.
With cryptocurrency being mined, bought, and sold over the internet, this has made the digital currency open to attacks from hackers. Already there have been examples of investors losing millions, with one British man losing every cryptocurrency he owned in Mt Gox’s $460 million dollar disaster.
Blockchain – the technology running cryptocurrencies – may be able to ensure that transactions are tamperproof, but that doesn’t mean the system can’t be corrupted by outside sources. For those who have either already invested, or are thinking of investing, in cryptocurrencies, here are 10 effective ways to protect your assets from hackers.
Get an offline wallet
Think of an offline wallet as the storage for all of your cryptocurrencies. It will organize every digital fund you own, and at the same time protect your data from hackers. An offline wallet can be stored on a hard drive and kept secure in a safe or safety deposit box. If you can, make sure to purchase a core wallet, which is compatible with most cryptocurrencies. It is essential to set a strong password for your offline wallet, and never lose the physical device. An offline wallet gives your cryptocurrencies strong protection but if you lose it, it can very difficult to retrieve your assets.
Encrypt sensitive data
As a cryptocurrency owner, this is one of the first things that you need to learn. Encrypted files make hacking almost impossible. That’s because the data you have will be assigned random letters, numbers, and special characters that only you can decrypt with a special device or online tool. Make several encrypted file folders for your wallet backups and passwords.
If you don’t know how to encrypt your files, check out the video below.
The two-factor authentication is your friend
Medium suggests that if you’re active on online cryptocurrency exchanges, you must enable the two-factor authentication option. With it, the hackers must physically steal your smartphone from you before they can hack anything. That’s because two-factor authentication requires the code being sent to a person’s smartphone on top of the usual password being asked upon accessing an account online. The smartphone code will only have a validity that lasts 30-seconds or less.
Never use public Wi-Fi
Never use a public Wi-Fi because these networks can see your private data. Always use your own ISP when exchanging and buying Bitcoins. If you must access your cryptocurrency using a public network, use a VPN in order to add an extra layer of security.
Back everything up
Back up every sensitive data related to cryptocurrency to have more than one copy. However, don’t use cloud services because these online services are also susceptible to hacking.
It’s always safer if you can back up your data offline (in the same way you would for an offline wallet). Use a USB stick storage to back up your files, and store it inside a drawer. Offline media is always better than online because once it is disconnected it can’t be hacked.
A multi-signature adds an extra layer of protection to your cryptocurrencies. Basically, it requires two or more people to approve a transaction before it can be carried out. Multi-signatures make it difficult for criminals to steal cryptocurrencies because they would need to hack multiple signatures from different sources before they can gain access to anything.
Spread your assets
Even after all the encryption, two-factor authentication, multi-signature, cryptocurrency wallet, and offline backups, you can protect your assets further by spreading them out. The saying, “don’t put all of your assets in one basket” rings true even for cryptocurrencies. Don’t just invest in cryptocurrencies directly; investing in them indirectly is also a good way to protect and diversify your assets.
People can get indirect exposure to the cryptocurrency market by investing in multiple investment vehicles like Bitcoin spreads. Nadex reveals that investors have minimum risk exposure from spreads because the risk-reward remains within a defined range. Spreads also allow people to trade Bitcoins without actually owning the digital fund – eliminating the risk of losing thousands from hacker activity. There are also Bitcoin futures now thanks to the initiative of the Chicago Mercantile Exchange group, which allow investors to purchase the cryptocurrency at a later date. Vary your assets in order to weather an economic downturn and at the same time prevent major hacker activity.
Don’t leave your cryptocurrencies on exchanges for a long time
If you are not trading cryptocurrency often, don’t store any cryptocurrency in your exchange account. Even if your online account appears secure, it is still at risk of being hacked. If the exchange losses all of your cryptocurrency, then you will likely not see them again. Cryptocurrencies are not insured, which means that if they get stolen, they’re gone forever.
Keep software updated
All of the software you’re using for your cryptocurrency exchanges must be updated. If you’re using a desktop, make sure your OS is updated because older versions are susceptible to ransomware. When a hacker locks down your PC they can gain access to your files. Check out Que.com’s infographic on how ransomware works, and how you can protect your assets from it.
Never use your smartphone as your main tool of exchange
Mobile wallets are cool for giving you some good amount of purchasing power at all times. However, make sure to carry only a small amount of cash (a couple of hundreds should do). Never use a mobile wallet as your primary tool for exchanging cryptocurrencies. If you lose your smartphone, you will risk losing all of your investments.
Image by pixabay
Minerva Lee is a tech writer for several media outlets. She’s also a financial consultant in Beijing. If she’s not writing or consulting, she likes running with her two dogs named Chip and Min Min.