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7 Practices to Keep Bitcoin & Cryptocurrency from being Stolen

Filed under Cryptocurrency

Keeping your Bitcoin and other cryptocurrency safe should be top priority. After all, there is a lot of money at stake as your cryptocurrency continues to mature. However, the very nature of cryptocurrency makes it quite easy to steal, and protecting it can be challenging.

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Since no financial institution offers a layer of protection for cryptocurrency, like Bitcoins, you will need to add extra layers of protection to secure your holdings.

“Unfortunately, IT security is a real-world issue, not just for bitcoin but within any industry that uses technology,” Daniel Scott of Coincorner told The Guardian. “You only have to do a quick Google search for recent hackings of large global companies to see that any company is open to security issues regardless of size or industry.”

But how do you prevent your Bitcoin or other cryptocurrency from being stolen? From doing your due diligence when trusting exchanges to being on the lookout for scams, there are a variety of ways to keep your digital currency holdings safe.

How Cryptocurrency Gets Stolen

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Hacking is a serious concern for anyone with cryptocurrency, especially those who have their holdings in exchanges or mining marketplaces. One of the largest cryptocurrency hacks came late last year when NiceHash was hacked for over $60 million in Bitcoin.

The NiceHash hack was a rare occurrence, due to the scale of digital currency stolen. But as the market price on Bitcoin and other currencies rise, so do the number of phishing attacks on exchanges and private holders. Phishers are commonly on the lookout for admin passwords and private keys that allow them access to wallets.

There are also fake cryptocurrency apps that mimic exchanges and trick those looking to buy digital currency. For instance, a fake Android app posing as the exchange Poloniex popped up in the Google Play Store. It accumulated 5,500 downloads before taken down.

As the value of cryptocurrency increases, the stakes are higher for theft than ever before. Here are 7 ways to keep your holdings safe and secure.

1. Think Device Security

Cryptocurrency doesn’t enjoy the protection of financial institutions, at least not yet. To keep your cryptocurrency safe, you need to think of your holding like other digital data, like online passwords and credit card information.

The main aim is to protect your digital wallet more than you would other important data. “The best way to defend against such malicious tools is to ensure that you use multifactor authentication for all of your logon accounts online,” Bill Dennings, Executive VP and Risk & Security Officer of Uphold recommended.

multi-factor-authentication

A few layers of device security include:

  • Run antivirus software on all your devices (PC, Mac, mobile device, etc.)
  • Screen your inbox carefully and never open anything suspicious
  • Set up two-factor authentication for every online account you have
  • Encrypt hard drives and mobile devices
  • Regularly backup your hard drive and devices

You may be very careful about protecting your identity from theft and the same should be applied to your cryptocurrency accounts.

2. Protect Your Private Key

Your private key is the first line of defense against cryptocurrency theft. The private key is a 256-bit number that allows access to your digital wallet. Everything you have is basically dependent on your private key, so it should be protected heavily.

If someone gets a hold of your private key, you could lose everything, because you are no longer the sole owner of the cryptocurrency wallet.

To keep your private key safe, employ the same security measures you have in place for device security. Two-factor authentication, strong passwords, encrypted hardware, or think about not storing your private key online at all.

3. Properly Research Exchanges

Remember the hacking anecdote about NiceHash’s $60 million hack? This makes researching exchanges absolutely vital to keeping your cryptocurrency safe and secure. First, you need to know and understand the two types of exchanges.

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Centralized Exchange

Using a centralized exchange means that you trust your cryptocurrency and private key with the exchange. It is like an IOU system, allowing the exchange to manage security of your funds. This can be beneficial if say your personal devices get hacked. However, centralized exchanges are prime targets for hackers.

Decentralized Exchanges

Using a decentralized exchange means that you can make peer-to-peer cryptocurrency exchanges, and you have complete control of your currency security. These types of exchanges are not as user-friendly for beginner or novice crypto trader, but you can ensure security of your private keys.

Picking the right exchange is important. Find out what security measures the exchange has in place, regardless if it’s centralized or decentralized. To keep your cryptocurrency from being stolen, a decentralized exchange is probably optimal.

4. Keep All Passwords Safe

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There are a number of crypto services that let you simply use a username and password, like traditional online banking, instead of remembering a private key. This makes accessing your account easy, but opens you up to theft.

For instance, someone can hack your email and then request a password reset from the crypto service you use. Once the password is reset, thieves can access your cryptocurrency account and steal your funds.

The best way to secure your digital currency from email hacking is to set up multi-factor authentication for the email connected to your digital wallet. The service you choose should also have multi-factor authentication in place as well, like a password and SMS text. Google Authenticator is also a great security measure, and simple to set up.

5. Fake Initial Coin Offering (ICO) Accounts

Initial coin offerings, or ICOs, are a way companies can raise cryptocurrency funding from investors. The use of ICOs has become a very profitable way for tech startups to get millions in funding. However, the rise of fake ICOs has also become an avenue of currency theft.

Hackers will impersonate companies by using a fake website and ask for funding. Everything looks normal and investors will fund the projects by sending cryptocurrency, usually Bitcoin or Ethereum, to a digital wallet not associated with the real company.

If you are looking to invest in a tech venture using your cryptocurrency, be sure the wallet address is verifiable with the real company. Otherwise, your funds will be lost forever.

6. Exit Scams

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Properly vetting cryptocurrency exchanges is essential, but exchanges are not the only digital currency services to research. The exit scam is a common way for crypto thieves to get your funds and vanish without a trace.

A new company may pop up offering crypto-related services with a very legitimate website and may actually be operating legitimately for a short period. However, they may suddenly close shop and disappear from the web.Taking your funds with them.

These types of exit scams are more common on the dark web. If you are dabbling in cryptocurrency ventures in the darker alleyways of the Internet, you should be extra careful and do very detailed research before transferring any money.

7. Store Your Cryptocurrency Offline

One of the best ways to secure your funds long-term is to store your cryptocurrency offline. Better known as “cold storage,” keeping your funds offline makes it immune to many online theft problems.

Cold storage entails keeping your digital currency on a hardware wallet, or simply writing down your private key on a piece of paper and keeping it in a safety deposit box. Storing your private key offline safeguards it from hackers, viruses, and other online hacking and phishing issues.

How Secure is Your Cryptocurrency?

Keeping your cryptocurrency from being stolen is not as challenging as it may seem. With multiple levels of security in place and plenty of research on the crypto services you use, you will be the only one to ever access your mounting funds. How do you keep your digital wallet safe?

Guest Author: Nick Rojas
Nick Rojas is a professional writer for Quertime.com.

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