Cryptocurrency Security: 10 Tips to Safely Invest in Cryptocurrency

July 25, 2021

MHC Digital Finance - March 23, 2021

Blockchain technology is the backbone of cryptocurrency. Blockchain is a decentralised technology that is distributed across different computers for record management, and cryptocurrency is a decentralized virtual currency based on this technology.

Today, cryptocurrencies in the likes of Bitcoin and Ethereum have become popular just like the US Dollar. More than 4000 different cryptocurrencies exist and are being used for the purchase of goods and services.

You may also use crypto as an alternative investment option outside of stocks and bonds. The best-known crypto, Bitcoin, is a secure, decentralized currency that has become a store of value just like gold.

Cryptocurrency Security: 10 Tips to Safely Invest in Cryptocurrency

There are some mixed feelings about investing in cryptocurrency as it is a high-risk investment with high market volatility, but with this risk comes the potential for your investment to be as highly profitable as the hype suggests. Cryptocurrencies continue to attract investors due to their increasingly secure nature; but if you're looking to invest in cryptocurrency then you need to be aware of security risks in holding crypto and digital assets, and how to mitigate them. Here is a list of the Top Ten (10) cryptocurrency security tips for a safe investment.

1. Use Secure Wallets

Although regrettable, online wallet hacks have grown in popularity on cryptocurrency exchanges even though they promise security for your cryptocurrency. As a secure option for storing your Bitcoins and other altcoins, it is not advisable to use online wallets as you do not have control over your private key. Your online hosting provider may host your wallet on computers/servers with less security and thus, make them prone to attacks. However many people still prefer to use this method of storing cryptocurrencies because it is simpler. If you must use online wallets from providers such as cryptocurrency exchanges, only store a small amount of your currency on them. For larger storage, you can use other more secure alternatives such as:

·       Hardware wallets,

·       Metamask wallet for ERC-20 tokens or other secure wallets,

·       Crypto Portfolios, etc.

 

Keep Your Private Key Safe.

For every cryptocurrency transaction, you need both your public and private key. Your public key is just like your bank account number for transactions, while your private key is used to validate account ownership. Your private key should be kept secret at all times and not shared with anyone. The best way to store your private key is by printing it on paper, writing it down; anything that does not leave a digital trace of it. This is called "Cold Storage". Some secure wallets use seed phrases to secure your private key, but remember that at any instance, you are responsible for the safety of your private key against hacks, so don't ever keep your seed phrases online.

Use Strong Passwords

To safely invest in cryptocurrency, you must always be security-conscious when it comes to your account passwords in order to avoid a data breach. Cryptocurrency itself is secured, but you need to play your part to ensure your accounts are safe at all times. To avoid a data breach, the following rules should help you secure your cryptocurrency:

·       Always make use of "Two-Factor Authentication". This security mechanism adds an extra layer of security to your account by ensuring that even if someone gets your password, they can't still access your cryptocurrency.

·       Never reuse specific passwords across your accounts. Make sure you have a strong, unique password which should be a combination of letters, numbers, and symbols.

Don't Take The Phishing Bait

Cryptocurrency investors are very good phishing targets. Many people seem to fall victim to the tactics of those with malicious intent due to the speculations around virtual currencies. With the rise in the price of different cryptocurrencies, phishing is targeted at those willing to invest. This technique is used to steal users' login details and other relevant information in order to break into their accounts. Phishing attacks can be initiated from a simple text message, email, third-party platforms, mobile ads, group chats, and bad websites. To avoid being a victim, you can safeguard your cryptocurrency by taking the following precautions:

·       Install trusted antivirus across all your devices (PC, phones, tablets, etc.), 

·       watch out for fake links, 

·       be sure of the apps you download or websites you visit,

·       check web security of websites such as SSL/TLS encryption, and other multi-factor authentication,

In summary, always put the safety of your cryptocurrency first before you click on a link or take action on any web platform.

Understand Cryptocurrencies and How to Keep Them Safe

Cryptocurrency is operated in a completely decentralized environment, so it is the sole responsibility of an investor to understand the nitty-gritty of the entire system and how they operate. Sadly, when cryptocurrency investors consider security, they leave understanding their cryptocurrency and how they operate out of the equation. They forget there is no central bank or any authoritative organization, and hence it is they who are responsible for the safety of their investments. With cryptocurrency, it is almost impossible to recover from losses if they should occur. Learn everything about the ecosystem, how to safely invest in crypto and all you need to be a successful investor.

Learn The Trade

Just like any other investment you would want to embark on, you need to learn. Train on a few trades, get familiar with concepts and platforms before you deposit a large sum of your virtual currency. Don't just follow the crowd, treat virtual currency investments like your real estate for example. Before you dive right into it, practice by doing some demo trades with a small sum of money.

InterExchange transfers

Swapping or trading your virtual currencies directly for others rather than purchasing new ones with cash is one way to trade cryptocurrency safely.  For example, it is safe to swap Bitcoin for Ethereum on exchanges because almost all exchanges have this trading pair (BTC/ETH). So if you have BTC and you are looking to invest in ETH , you can just transfer your BTC to a trusted exchange of your choice, and make the BTC/ETH swap without interference or fear of being robbed. You can also use this method for other altcoins hitch-free.

Do Your Own Research

Going through large information just to keep up can seem boring, but it is rewarding. Researching any cryptocurrency cannot be a mistake as it gives you a more in-depth understanding of the happenings around your investment. There are over 4000 cryptocurrencies, so it is wise to research any before you dive into it as there is always the potential that some may be fake. There are different aids for your research, and you can use them freely in your spare time. They are:

·       Twitter, Telegram Channels, Discord groups,

·       Online reviews,

·       Going through the white paper of the project,

·       Checking forums,

·       Official websites of crypto projects.

Don't Put All Your Eggs In One Basket

This fundamental principle of investment also applies to keeping your cryptocurrency safe. Break up your virtual currency investments across several currencies, not just one.

Keep Your Eyes Open

The last tip is about scams. It can't be overemphasized that cryptocurrency investors are a target by those with malicious intent. You have to be vigilant at all times to avoid these scams. Avoid any quick scheme claiming to 'double investments' or 'creating returns without stress' as a slogan, or schemes claiming to be endorsed by famous Australians. You don't want to lose all you have worked so hard for in one day.

Conclusion

Taking up a new investment isn't always easy, that is why you need to put in time and effort just to keep your cryptocurrency assets safe.

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