The triumph of cryptocurrencies also draws scammers. We share six tips on Bitcoin Future how crypto investors can protect their cryptocurrencies.
“Be your own bank” – a motto that you hear again and again in connection with cryptocurrencies such as Bitcoin, Ethereum, and Co. However, there is a small problem, because: In contrast to Volksbank, Sparkasse, and Co., nobody is liable for cryptocurrencies if the “private bank” falls victim to a theft.
Analysts consider it likely that custodial service providers will also play a significant role for small investors in the future. In this case, a third party then takes on the task of securing the crypto assets – similar to how banks do with fiat money today. However, this area of the crypto industry is still in its infancy. Crypto investors are therefore responsible for the security of their assets. But what do you have to believe here? How can investors protect their cryptocurrencies? Which procedure is recommended?
Analysts consider it likely that custodial service providers will also play a significant role for small investors in the future. In this case, a third party then takes on the task of securing the crypto assets – similar to how banks do with fiat money today. However, this area of the crypto industry is still in its infancy. Crypto investors are therefore responsible for the security of their assets. But what do you have to consider here? How can investors protect their cryptocurrencies? Which procedure is recommended?
Tip number 1: Manage your cryptocurrency yourself
There is an iron rule in the crypto industry. It reads: “Not your Keys, Not Your Coins”, This means that cryptocurrencies are usually stored in a digital purse (the so-called wallet, a small app). To do this, you create an account with such a wallet and then receive the so-called private keys.
This private key is a sequence of 51 alphanumeric characters that grants exclusive access to the created account. Anyone who has this key can access the associated crypto assets and make transactions from anywhere in the world. Conversely, this means that if you do not have this private key, you do not have the associated cryptocurrencies either.
For example, if you buy a cryptocurrency on a crypto exchange BingX, Binance, and PrimeXBT, and then leave it there – instead of transferring it to your wallet. Because: In this case, the exchange keeps the coins and thus the keys. In the worst case, this can lead to a total loss of crypto assets – for example, if the stock exchange is hacked and the attackers make off with the funds. This case may sound improbable, but it is not: The still young crypto industry has experienced numerous attacks on exchanges in a little more than ten years of its existence – usually with losses in the millions. Usually at the expense of those investors whose coins were stored on the exchanges. In short: “Not Your Keys, Not Your Coins!
Crypto tip number 2: Use a hardware wallet
One of the best and most effective protections for cryptocurrencies like Bitcoin or Ethereum is to use a hardware wallet. The hardware wallet is a small device that stores the aforementioned private keys to make it almost impossible for hackers to access them. This feature is precisely the advantage over conventional software wallets. However, whenever you use them to send Bitcoin or Ethereum, there is a possible attack vector where hackers can get to the coins. For example, if the respective computer is infected with malware that reads keyboard entries.
A hardware wallet creates an additional layer of security here since the private keys are firmly anchored in this device. You never leave it – not even for crypto transfers: If you want to make a transfer, you only have to connect the wallet to the computer and confirm the transaction on the device. By using a hardware wallet, hackers have almost no chance of attacking private crypto assets. The best-known hardware wallets manufacturers are Ledger and Trezor, but there are also smaller providers. The devices are already available for 60 euros. The Ledger Nano S model, for example, has proven itself for beginners.
And: If no hardware wallet is used, a software wallet with two-factor authentication (2FA) should be used (e.g. Electrum or Exodus). It is also advisable to activate this extra security measure wherever possible, including crypto exchanges.
