You might be thinking about investing in some cryptocurrency but are currently lost as to how to secure your crypto. Owning cryptocurrency shares few similarities with storing your cash. When you store your cash in a current account the Bank takes responsibility for keeping your money safe. In the case of a current account the bank takes out an insurance policy to protect your money. Should something happen to the cash in your current account the bank’s policy will pay out in order to compensate you for your loss.
In the case of cryptocurrency it is up to you to take steps to protect your money. This is the price that you have to pay for absolute privacy and autonomy to spend your cryptocurrency however you see fit. However, there are steps that you should take in order to protect your cryptocurrency as best as possible. Think of these as best practice suggestions.
Online wallet safety
Whilst online wallets are extremely convenient for accessing your cryptocurrency, they are also an easy target for hackers. Use online wallets only for trading and spending your cryptocurrency in the very short term (a couple of hours). For longer term storage make sure that you set up something more secure. For example, a hardware wallet solution disconnected from the internet. This is the only way that you can be reasonably confident that your cryptocurrency is safe.
More secure: Paper wallets and back-ups
Let’s say that you decide to store your private keys as a paper wallet. It goes without saying that you should store your paper wallet in a secure place such as a safety deposit box. However, you should also make a copy of the paper wallet and store the copy somewhere equally as secure. It is quite possible that you could lose or damage the paper wallet, in which case a backup will be invaluable. However, make sure that your back-up is in a different physical location to the original. Furthermore, it’s a good idea to laminate your paper wallet to prevent degradation and damage over time.
Making back-up copies is sensible practice for any software or hardware solutions. It’s quite possible that there could be damage to your private keys. For example, your computer could get a virus in which case the private keys could be lost forever. Back-ups are extremely important as if you lose your private key there is no procedure to recover your cryptocurrency.
The use of cryptocurrency transaction addresses is important if anonymity is important to you. If you use the same transaction address for each transaction then it might be possible for someone to group the transactions. This might allow someone to track the payments back to one person, i.e. you.
Downloading the blockchain transaction history to your wallet allows the server to view your IP address. This might give away your identity or at the very least, your location. Some wallets only download parts of the blockchain. This will result in multiple downloads of the blockchain each time you access your wallet. Some wallets download the whole blockchain reducing the number of times you share your IP address. Additionally, you can use the Tor Project in conjunction with wallet use. This will provide you with the ability to hide your IP address when downloading the blockchain.
Hopefully it goes without saying that you should not share any of your passwords with anyone. Nor should you share the locations of any of your hardware or paper wallets. Finally, should you wallet offer two factor authentication, or even multi factor authentication then make sure that you use it!
Ultimately the security of your cryptocurrency is entirely up to you. If you choose to play fast and loose with your security then you have only yourself to blame if something happens to your cryptocurrency.