Bitcoin inspires all sorts of motivations – from noble ones to less noble ones. It’s an asset class that’s targeted by scammers at an incredibly high rate. Each year, individuals and crypto exchanges lose millions of dollars to such theft.
But that doesn’t mean Bitcoin or other cryptocurrencies are a security nightmare. It all really depends on how careful you are – and the measures you take to secure your Bitcoin assets. Let’s look at some easy steps you can take to protect your holdings.
Use Long and Complex Passwords
The keywords here are ‘long’ and ‘complicated.’ Even if your password is complicated enough, it’s still an easier hack than a long and complex one. For instance, a hacker would more quickly guess “pas$w0rd” than they would “Hell0Thi$isMyPas$Word”. Also, a single uppercase letter is not enough to cushion you against hacking. At the very least, make sure your wallet and account passwords meet these criteria:
- Have lowercase letters and uppercase letters, numbers, and symbols
- Have at least 40 characters or more.
- Is not in obvious sequences, for example, 12345 or abcdef
- Is not a common word or obvious character replacements
- Is not in repeated letters/numbers or keyboard patterns like “444”, “ttt” or “cvbnm”
Now, the longer and stronger password is, the harder it is to remember. There are a few resources you can use to prevent this from happening, including a password management software or secure offline storage, like an encrypted USB drive. Also, remember never to use the same password for more than one account. A single security breach could result in a hacker getting access to all your funds.
Enable a 2-Factor Authentication (2FA) On All Your Crypto Accounts
With a 2FA, you’re required to use two authentication factors to verify your identity. One identifier is your password, and the other could be a phone call, a biometric factor, etc. That said, you need to watch out for 2FA’s that are still vulnerable – e.g., phone calls or text messages. Hackers have devised a new trick of calling up phone companies and successfully impersonating customers, which makes a phone call or text message 2FA insecure. Instead, you could enable a 2FA via:
An authenticator app, like Google authenticator –which automatically generates 2FA codes for your account every 30 seconds, and is entirely free,
A universal second factor (U2F), which is like an encrypted USB that you can insert into your device as a form of 2FA. Some trusted U2F’s include FIDO and YubiKey.
Enable IP and Wallet Whitelisting
Whitelisting is a security feature that allows you to create a list of trusted IP addresses that can interact with your funds. Ensure your crypto exchange has these security settings:
- IP whitelisting – which allows only authorized users to use your IP address to authorize trades, sending of crypto, or paying for things through your exchange account.
- Wallet whitelisting – in which you share with the exchange your wallet’s public key. After that, only you will be able to withdraw funds from the exchange to your private wallet.
It’s worth noting that not all exchanges have enabled whitelisting options, so make sure to ascertain that before you sign up for any wallet.
Use a Reliable VPN on Public WiFi
Public WiFi connections in restaurants, hotels, airports, etc. are an easy target for hackers.
If you must access your crypto account on a public network, it’s highly advisable to use a reputable Virtual Private Network (VPN) such as ExpressVPN, NordVPN, Tunnel Bear, or VyprVPN. This precaution will prevent your account login information, i.e., passwords, private key, and recovery phrases from being intercepted. A VPN is an extra layer of encryption that will also conceal your identity, location, and IP address.
Separate Your Trading Funds from Your Savings
If you’re a regular trader, separate your trading funds from the rest of your funds. Keep the rest of your funds in a cold storage, e.g., a hardware wallet or a paper wallet.
This precaution is essential because storing all your funds on your exchange renders them vulnerable to hacking, phishing attacks, etc. There are many stories of hackers successfully getting away with lump sums of crypto from crypto exchanges – so be careful.
Back-Up Your Backup
Backing up your back-up means having a second line of defense in case you forget your account or wallet details.
You can do this by first encrypting a flash drive and then adding a text file of information on all your passwords, private keys, and seed phrases. To encrypt a flash drive, simply right click on the drive in your “My Computer” window and select “encrypt,” follow the instructions, and set up a password.
The second step is storing the flash drives in separate and safe places, like a safe deposit box. For an added layer of security, you could even split your private key into two flash drives, i.e., one half in one drive and the other in a second drive. That way, even if someone manages to get hold of one flash drive, they can’t access your crypto. Make sure you don’t forget the passwords, however.
Encrypt a “Digital Will”
Treat your crypto holdings like any other asset – you need to ensure they go to your beneficiaries when you’re gone. But, leaving a will for your crypto assets for your loved ones requires a bit more planning than that for traditional assets. So how do you go about it? While you will eventually have to talk to an estate planning lawyer, you can get started with the following steps:
- Ensure your beneficiary knows the location of at least one of your encrypted flash drives.
- Ensure they have the password to decrypt it
- Include in the flash drive a “digital will” – a file that lets them know how exactly to access your Bitcoin.
Some people may find it challenging to understand how to handle cryptocurrency. To make it easier for your inheritor(s), try writing down the instructions in a manner that a crypto novice would understand. Let details include how to access your wallet, exchanging of cryptos to traditional currency, etc.
Don’t Brag About Your Holdings
Finally, when it comes to cryptocurrency, discretion is key. You’re much safer that way. There are a lot of people who have been targeted in extortion to ransom attacks. Often, these people were known traders, investors, or just people who couldn’t keep quiet about their hoard.
One common ploy is for extortionists to offer to buy crypto at a price way higher than the market price, and suggest a face to face meeting. Once the person arrives, they ambush them and strong-arm them into transferring the funds without payment.
It’s better to remain tight-lipped about your crypto holdings. And just to be extra safe, consider splitting your cryptos into more than one wallet to mitigate the risks of any such occasion.
Just like you would take steps to protect your other valuables – you should (and even more so) take steps to protect your cryptocurrency. Securing your crypto shouldn’t be a daunting task. Follow this guide and get started on safer interaction with your cryptocurrency today. Also, remember to do more grounded research on best practices to secure your crypto – and you’ll be good to go.