“Crypto investments don’t need protection.”
In this article, we won’t get into basic definitions. There’s a crypto inheritance article we’ve published on cryptocurrencies in the context of inheritance that provides answers to questions such as ‘What are cryptocurrencies?’, ‘What is a blockchain?’, ‘Can crypto be inherited?’, etc. Instead, we’ll focus here on crypto security.
When I speak with someone about cryptocurrencies and I mention Bitcoin or Ethereum and security in the same sentence, I’m often confronted with the same question. It comes in various forms and shapes:
- Why does crypto need security? Isn’t it supposed to be the most secure way to make online transactions?
- Doesn’t Bitcoin use cryptography, which means it can’t be hacked?
- Why do I need to secure my crypto coins? They’re already on a distributed network and are the most secure currency.
But these all signify the same thing – the myth that cryptocurrencies don’t need protection, being the ‘most secure form of payment’ and all that. In reality, cryptocurrencies are a digital asset like any other. Depending on how you store and use them, there are a multitude of ways someone can take them from you. We have the mindset to protect all of our assets; it only makes sense to do the same with one of the most popular digital assets of the past decade.
In the next few paragraphs, I’ve outlined a few basic ways that could help you do that.
OK, this has turned into a huge cliche in recent years, but it’s still a really valid measure you must take in order to secure your crypto (and not only). Of course, this is primarily applicable if you’re using an online exchange for your cryptocurrency as your regular user account with them can easily be hacked if not protected, but it also applies to any other connected accounts (starting with the one you use to log into your computer’s OS, your email accounts associated with your account with the exchange, etc.).
Some exchanges offer built-in 2FA (via email or SMS for instance); others allow you to use an authenticator app for your phone. Regardless, if you wish to use an exchange, be sure to select one with as many two-factor authentication options as possible.
Don’t use exchanges for too long
If you’re just getting into crypto and you’re still finding your way, and – most importantly – you still don’t have too many resources invested in crypto, it’s perfectly fine to use an exchange. In simple terms, a crypto exchange is a service that allows you to trade or stake your cryptocurrencies online. There are a lot of advantages in using such a service: the variety of cryptocurrencies, ease of use and access, support, etc.
But there’s one huge disadvantage which negates all the benefits if an exchange is used for too long: they actually hold your crypto for you. What that translates to is you’re no longer the owner of your crypto; you rather have an account with them that contains a reference to what part of the wallet of that exchange you own.
As you might’ve guessed, that makes you extremely susceptible to an attack made on the exchange. Someone stealing your credentials is one thing, but a hacker gaining access to the exchange’s funds (meaning your funds) is a completely different ball game (one in which you don’t play a role).
Use a cold wallet (or two)
Unlike hot wallets (in very broad terms, those that require an Internet connection), cold wallets offer a healthy dose of additional protection for your crypto investments. As the name suggests, these are physical devices that don’t need an Internet connection. They’re becoming more and more accessible, which means you can even branch out and use more than one device for your different crypto investments.
Apart from having one or more cold wallets, you could also use an additional form of protection: a hot wallet in front of them. So when you need to make a transaction, you make it from your hot wallet, but you put one more transaction in front of the first one, from your cold wallet to your hot wallet.
Properly back up your seed words
Seed words – or recovery phrases – are what you use to recover your cryptocurrency if something happens to the device that holds it. Seed words are simple if looked at individually (‘apple’, ‘orange’, ‘car’, etc.); however, there are usually several tens of them, which makes it excruciatingly hard for anyone to guess or crack them. They’re usually created during the initial setup of your wallet.
One thing that people forget to give enough attention to, however, is backing up their seed words. Regardless of whether you’re in a hurry or are simply not paying attention, never take a screenshot or save them in another digital form. Seed words are properly backed up when written on a good, old-fashioned physical piece of paper (or two). That way, you’re not only making it impossible for someone to digitally access them, but you’re also extending your crypto security setup.
Use a digital inheritance service
This is not something people immediately think of. Say you’ve been diligent in protecting your crypto and you’ve done everything right; what happens with your crypto investment if something happens to you? Your loved ones don’t stand a chance of inheriting it. Unlike regular assets, such as real estate, fiat money, shares in companies, etc, cryptocurrency is something that has a 99.9% chance of being lost forever if you are no longer around, simply due to how the whole ecosystem works.
By using a digital inheritance service, you practically ensure your crypto investments have the final bit of security they need. We at DGLegacy are here to help in achieving that goal. Through our world-class digital inheritance solution, you’ll be able to:
- Catalog your cryptocurrencies, be they in hot or cold wallets or online exchanges, and the ways and places in which they’re stored
- Provide only as much information as you choose on how your loved ones can find and recover your crypto assets
- Assign beneficiaries and trustees to your crypto and other assets
- Have peace of mind that our proprietary Heartbeat protocol will take care of the rest.