Is crypto safe? Here’s how to keep your investment secure | Matjaž Škorjanc
In 2022, it’s pretty safe to assume that most people have at least heard of cryptocurrency, whether they’re interested in the sector or not.
But for those considering whether to get involved with cryptocurrencies may be concerned about security. If you’ve ever wondered whether crypto is safe, this blog is for you.
Is crypto safe — where do the threats come from?
Digital currencies are notoriously volatile in value. Bitcoin and the wider markets are currently going through a downward swing, which seems to be finally levelling out.
And, of course, these price swings are extremely attractive to speculative investors and cybercriminals alike.
Since Bitcoin launched in 2009, there have been numerous heists reported on crypto wallets and exchanges. So, if you’re involved, or thinking of becoming involved with cryptocurrencies you need to know where the major threats come from.
Most of the threats from cyber criminals concern digital wallets, also known as cryptocurrency wallets.
What’s a digital wallet and how does it work?
It’s really important to understand crypto wallets and how they work before you start to speculate in cryptocurrencies.
Cryptos are stored in a number of different types of offline or digital storage systems. All of the different options offer slightly different features.
Anyone who is blasé about crypto storage could become unstuck — there are myriad stories of people losing access to millions of dollars because they have forgotten their security password to the crypto wallet that stores it.
What’s the safest way to store crypto?
Cryptocurrency storage isn’t a ‘one-size-fits-all’ situation. It depends on numerous factors, including you want to use your coins. Do you want to save, invest or spend, for example?
Digital security experts security.org say that the crypto buyer should split storage between two digital wallets:
This is where most of your crypto should be stored — totally offline and in a safe place. You can use this to refill the hot spending wallet as needed.
This should only hold a small amount of your over crypto investment. Think of it as the cash you carry around every day to spend or transfer easily.
Different forms of crypto storage
There are four main ways to store crypto:
- Mobile wallets.
- Desktop wallets.
- Web-based wallets.
- Offline wallets — physical hardware.
For each storage type, you need a set or private ‘keys’ to get access to the crypto inside. If you lose the key or forget the code, then you have no way of accessing that money and it could go to waste.
By far the most popular way to store crypto is in a digital wallet, which should be considered in the hot wallet category as explained above. Be aware that even though the digital wallet is encrypted, it’s not necessarily the most secure option for your crypto.
Digital wallets can be accessed from a smartphone, device or computer and therefore give you instantaneous access to your stash of crypto from anywhere in the world. However, this instant access online also makes them more susceptible to hackers and cyber criminals. This is why offline wallets should be used for a cold storage option.
Offline wallets — advantages and disadvantages
These are your cold storage option that should house most of your crypto investment. You shouldn’t be expecting to access it regularly for small transactions. Offline wallets aren’t a physical object, even though they’re not online — they’re essentially storage that isn’t connected to the Internet. Their keys are kept offline too.
Advantages of these offline wallets are they are safer than online digital wallets as they’re less likely to be exposed to the dangers of hacking. If they’re stored on a computer, you could still need to install antivirus software to protect against malware that specifically targets cryptos.
Hardware wallets — advantages and disadvantages
These are exactly like a USB or external hard drive, with crypto stored on physical pieces of hardware. These days, they’re not as commonly used as digital or offline wallet, but they do offer totally anonymous transactions as the user’s personal data isn’t stored on the same piece of hardware.
They also cannot be exposed to malware and are therefore more secure. However, they can be lost and if they are, whatever is stored on them is also lost.
Paper wallets and physical coins
These two options are not ideal for crypto beginners. A paper wallet can be used for Bitcoin, but you do need a thorough understanding of crypto to properly operate it. Services such as Wallet Generator allow you to print Bitcoin paper wallets, but there are various things to watch out for.
As well as printer network security issues, paper wallets can also be damaged, lost or the ink printed could fade. And if this happens then you probably won’t be able to use the currency. Similarly, while physical coins offer a comfortingly familiar way to store Bitcoin and obviously don’t need online connectivity but can be lost or stolen. Printing physical coins costs extra money on top of the investment.
Ultimately, there is no single option for every crypto user. You need to find the solution that suits your needs the best.
Originally published at https://www.matjazskorjanc.com on March 12, 2022.