Most of the newbies in crypto urge to buy some tokens and don’t care much about where to keep them. That might be a crucial mistake. Neglecting security can cost you dearly.
Be it a credit card with fiat money or your personal home safe with cash, you are probably accustomed to comply with all security measures.
Crypto wallets, though, are generally considered to be secure ‘by default’. Just because it is a blockchain, right? The safest technology in the world, isn’t it?
So many users never actually think about how secure their crypto wallet is.
And sometimes it turns into a financial tragedy, the degree of which depends only on the amount of the lost crypto. No matter if it is 0,00005 BTC or 5 BTC, losing money is always painful.
Don’t keep all your cryptocurrency in one place
Let’s start with a quite obvious and basic rule that for some reason most users usually ignore.
No matter how large the amount of cryptocurrency you own, don’t keep it all in one place. In other words, you need multiple crypto wallets to keep your tokens safe.
This is also quite reasonable from the point of view of usability, but we will get back to it in a minute.
Security concerns are the reason important enough to conclude that you need more than one wallet. Even if one of the wallets is compromised, only a part of your crypto assets will be stolen.
Store you main assets in a non-custodial wallet
We’ve covered the differences between custodial and non-custodial wallets.
In short, when using a custodial crypto wallet you don’t get your private key (you are never given your key phrase), instead it is being held by the owner of the service you use (a crypto exchange, most often). Basically it means you don’t have the crypto, it is owned by the exchange, you get access to it only through your account. If the account is blocked, you lose the crypto.
A non-custodial wallet allows you to store your private key. You and only you can have access to the assets. It’s a bit dangerous because if you lose the key phrase you might never recover your crypto. But it also means that nobody, even the company that developed that software or hardware wallet can’t access your assets.
The safest option of course would be the hardware wallet (the cold wallet), but it is not always convenient for many users. So you might go with a crypto wallet in an app for iOS or Android. Just make sure it is a non-custodial wallet.
Never store your private key online
Even if you were careful enough to choose non-custodial wallets which are quite secure, there is one potential problem. We’ve mentioned it above briefly. Now let’s talk about it in detail.
So when you are registering a new non-custodial wallet you are provided with the private key.
At the dawn of the crypto era their most common form used to be a long string of random numbers and characters. Which was not particularly user-friendly, as you can imagine.
Even writing this key down on a piece of paper was problematic, not to mention remembering it.
This is why a better way to display them was gradually adopted. The key can be presented in the form of a secret phrase.
So most of today’s crypto wallets do not show you the cryptic private key by default anymore. Instead, the private key is translated into seed words. Depending on the wallet, you will be given either 12, 18 or 24 seed words. Generally, it is a secret key phrase that you might even be able to remember. Especially if you do care about the large amount of crypto stored in that wallet.
So when you get the key phrase you are advised to write it down and store somewhere to keep your crypto wallet safe.
To many users that would mean copying it so a notes app of some kind. Like Google Keep or Apple Notes.
This is not secure! Because in such a way your key phrase will be stored online, being a potential subject to various hacks, scams etc.
Google, Apple, Microsoft and others might claim they use strong encryption to protect your data. But we all understand how dubious these statements are.
Use a reputable cryptocurrency exchange for buying and selling
So you know that it is better to store your crypto in a non-custodial or even hardware wallet.
But what if you need some crypto at your instant reach. Maybe you need to buy or sell it from time to time, or do some transactions. A custodial crypto wallet at some crypto exchange is much more convenient for fast transactions. So you might throw a part of your assets there.
Just make sure to choose wisely. There are plenty of organizations that call themselves ‘crypto exchanges’. It is better to pay a little bit higher fees but to make sure the exchange will not let you down.
There are plenty of famous hack and fraud stories with crypto exchanges. Users have lost literally billions of dollars.
Try to choose among the most famous exchanges (Coinbase, Kraken, Binance etc.) and try not to keep too much of your crypto in these wallets anyway.
Always secure your network
No matter what kind of crypto wallet you use and how many of them you have, it is very important to take care of the network security.
Numerous hacks have been made thanks to users who neglect the basic rules of network secutity.
First of all don’t use primitive passwords. You might be using a non-custodial wallet but your seed phrase might be stored in the Notes app of your smartphone which is protected with a lock screen password 0000. That’s quite a typical situation today.
Many users don’t update their software regularly. Some even feel irritated by the constant update reminders in their operating systems and try to switch them off. Meanwhile in most cases those updates are dealing with security issues. Sometimes a recent security patch might be the only way to keep your crypto wallet safe.
Beware of phishing attacks through various pretty ‘innocent’ email links or website forms. Many of them are targeted at crypto wallets specifically, trying to steal your private key or exchange’s login credentials.
Be sure to use VPN at all times. It is especially required when you are connecting to a public network with free Wi-Fi. But even at home it is still better to do your crypto transactions being protected by end-to-end encryption from a well-established VPN provider. A few dollars a month for VPN can save your much precious crypto assets.