Cryptocurrency: Cryptocurrency for Beginners: Guide to the Most Common Cryptocurrencies and Altcoins by Phillips Reginald P

Author:Phillips, Reginald P. [Phillips, Reginald P.]
Language: eng
Format: epub
Published: 2019-08-14T16:00:00+00:00

Chapter 6: How to Safeguard your Cryptocurrency?

In recent news, a crypto exchange QuadrigaCX found Gerald Cotten passed away, and the clients were unable to access $190 million worth of Bitcoins and other funds. Such kind of news can be alarming for all investors. Gerald’s wife says that the passwords to the storage are unknown to her, which leaves investors with nothing. Not just that, the continuous risk of hacking of digital currency exchanges is another major threat to investors. Bitcoin and other top currencies have always been a target for hackers. Since these currencies are unregulated by any government authority and very little legal course of action can be taken, hackers are figuring their way out to hack these accounts without leaving any digital trace behind. Here are some tips that investors can keep in handy before investing in cryptocurrency.

Choose a secure wallet

Investors have tons of wallet options from many companies that offer some shiny and attractive features. However, one must be careful of any virus or malware that might go undetected. Many cybersecurity experts have spoken about the risks involved in choosing the wrong wallet. You must always ensure that you choose a regulated exchange with safety mechanisms in place. QuadrigaCX faced liquidity issues for months, and little bit of research would know this. There are no proper legal frameworks for these exchange companies; most of them are startups and do not go through regular audits from a well-known financial regulator. From governance, risk management and compliance standpoint, these loopholes can be very risky for investors. One must do thorough research before they invest in a wallet.

Do your research

Cryptocurrency wallets use a secret to authenticate the user according to research experts. This secret is usually encrypted with a password. If the password is lost or forgotten, then, the crypto coins in the wallet are lost. There are tons of wallets available in the market- hardware, software and even paper wallets, and each one comes with its pros and cons- one must do their research before choosing this. According to researchers, a normal hardware wallet, that stores a user’s private keys are considered to be the most secure form of wallet. However, if this type of wallet is lost, there is no way of recovery.

Stock your digital coins in cold wallets

You can store your coins in hardware devices such as a USB or hard drive and avoid storing it on online. The idea is that cryptocurrency investors should be able to see or feel their money. We have already learned a lot from the QuadrigaCX situation. Apart from that, there is always a threat from hackers and scams on online exchanges and wallets. The chances of your currency being stolen are high. A USB Device usually has buttons that ask the user to confirm or cancel a particular transaction by touching the device- this ensures that no hacker will be able to record your keystroke.

Never put all your currency in the same place

This is a piece of very common advice and as good as saying that one must not lay all their eggs in a basket.

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