Bitcoin has seen huge increases in value. So have altcoins like Dash, Litecoin, and Ethereum.
As values rise, many people are becoming the victim of cryptocurrency hacks. More and more people are asking: “How can I protect my coins?”
Since cryptocurrencies are decentralized, the middleman is gone. You serve as your own bank.
However, with great power comes great responsibility. You are responsible for protecting your coins. And if you aren’t careful, you could find yourself with a completely empty wallet.
Here’s how you can keep your coins safe from hackers.
But first, we need to go over all of the ways that coins can be stolen in the first place.
In December of 2017, cryptocurrency mining company NiceHash reported a hack that resulted in $60 million in Bitcoin being stolen.
The hack wiped out NiceHash’s entire Bitcoin “wallet.” It also impacted the brand’s reputation pretty negatively:
NiceHash is just a small example of thousands of attacks on cryptocurrency businesses.
There have been numerous phishing attacks on Bitcoin exchanges or private holders which have had a huge effect on the coin’s fluctuating prices.
Phishers are after private keys and administrative passwords that would allow them to access Bitcoin wallets.
Imposter cryptocurrency apps are a whole different animal. Recently, an IOS app acting as the official MyEtherWallet app went live on the iOS App Store for a few days.
Customers looking to use MyEtherWallet, which allows users to generate Ethereum wallets, were fooled by the fake app created by scammers.
The same thing happened with the Poloniex exchange. In November of 2017, fake Poloniex apps began showing up on the Google Play Store.
People who installed the apps believed that they were really connecting with the legitimate exchanges that the fake apps were masking themselves as.
They might have given passwords to their accounts to hackers without even knowing it.
But while you can’t do much once your password is compromised by a hacker, you can protect your passwords from being stolen. Create strong passwords from the get-go.
The first step to avoid phishing or hacking attacks is to set up strong passwords for every single one of your cryptocurrency accounts and wallets.
When accessing or setting up cryptocurrency accounts, try to keep a few precautions in mind.
Always use different email accounts for every account you create on each exchange. Only use that email address when accessing that specific exchange.
Use a unique password for every account to minimize the damage that hackers can do if they get a hold of one password.
Always enable two-factor authentication for every exchange account you create. This adds an extra layer of security to your account that makes it even harder for hackers to steal your coins.
Never store wallets and passwords in the same location. If you do, an attacker can gain access to your wallets and passwords all in one swipe.
Don’t mention which exchange (or wallet) that you’re currently using on social media or across the web. Hackers can use this information to begin trying to decode your password.
Always back up your wallets to make sure that your coins are protected, no matter what happens with your main device.
Use external hard drives, a USB flash drive, or encrypted backup files to secure recovery options. If you need a program to help encrypt these files, try out VeraCrypt.
Next, we need to dive deeper into exactly what private keys are and how they work.
Private keys will look something like this, depending on the cryptocurrency:
At first glance, private keys might look complex and complicated, but they aren’t. They’re simply long lines of letters and numbers that provide access to your coins.
For each private key, there is a public key. The two keys are called key pairs.
The public key is used to store coins, while the private key allows you to send coins stored within the public key.
The pairs are connected by a one-way mathematical algorithm.
This means that the public key can be obtained through the private key, but you can’t obtain the private key through the public key.
That way, people who know your public key can’t find out your private key information.
And that’s a good thing or else everybody could find out your private key if they know your public key.
For example, the public key listed on the left of this image only belongs to the private key listed on the right.
The public key is sometimes referred to as the “address.” This is the line you copy, paste, and send to other people when you’re looking to receive coins.
Because of this, it doesn’t really matter who knows your public key.
But you never want anyone to know what your private key is because this key allows you to actually spend the coins that have been sent to you.
Now, you might be wondering, “How can I generate private and public keys?” Read on to find out.
There are tons of different kinds of software and applications (wallets) that can help you generate keys.
Some of these tools generate keys online, while others generate keys offline. It’s a bit more secure to go with the offline route, but here are some online generation options:
Software that generates keys offline include:
To keep coins safe, it’s also important to understand the different types of wallets available for actually storing coins.
Traditional currencies can be stored in physical wallets or bank accounts.
But storing cryptocurrencies is a bit more complicated of a process.
They’re stored on the blockchain. The addresses to wallets on the blockchain act like the account numbers to a traditional bank account.
Every wallet has a private address and a public address, as we’ve already covered. However, you should never store actual tokens or coins in your wallet if you can help it.
Only store the public and private addresses there.
Most coins have an official wallet, called a “core wallet,” created by the same company that made the coin and the software that backs it.
These wallets contain a ton of data that takes up a large amount of space on your hard drive.
The Bitcoin core wallet, for example, includes a record of every single transaction ever completed using the Bitcoin blockchain.
If you’re just looking to store cryptocurrency and don’t plan on making trades anytime soon, keep all of your coins in a cold wallet.
Cold wallets aren’t connected to the internet, which reduces your risk of being hacked online by taking your coins off of exchanges.
You can keep receiving cryptocurrency with a cold wallet, but you can’t send coins until the wallet is connected.
Hot wallets, on the other hand, are connected to the internet at all times.
These are more convenient to use, since you can use them for regular transactions, but they’re also more vulnerable to hacking. Avoid them if you can.
Overall, there are five different kinds of wallets. Desktop wallets, mobile wallets, online wallets, paper wallets, and hardware wallets.
Desktop wallets are downloaded and installed to computers. With these, there’s a risk that you may lose your finds if your desktop becomes infected with a virus or gets hacked.
The official Bitcoin wallet offers a desktop wallet version.
Mobile wallets like BRD are always accessible since they’re app-based. If your phone is hacked or stolen, your funds may be lost.
Paper wallets are not only the cheapest method of storing coins, but they’re also among the safest.
Paper wallets are simply a print out of private and public keys that contain QR codes.
This wallet keeps you safe from online hackers, but you have to keep it safe from fire, water, and burglars.
Hardware wallets, also known as cold storage wallets, are easily the safest way to store coins. They keep your information offline.
Hardware wallets like Trezor are designed to store both public and private keys.
Hardware wallets are a bit expensive, but they’re the safest option for storing cryptocurrency.
If you want to take your security even further, only store a small amount of Bitcoins in your wallet at any given time.
Cryptocurrencies like Bitcoin are worth all of the hassle that it takes to keep them safe.
If you lose a regular wallet, you’re broke. The same goes for cryptocurrency wallets.
It’s possible that something can happen to your wallet no matter the precautions you take or the wallet you choose.
Therefore, you should only store a few coins on your wallet to use as “spending money.” Keep the rest in a different, secure location.
Be sure to back up all of your wallets, too. If your phone is stolen or your computer crashes, you need to be able to restore coins.
Back up the entire wallet, not just visible Bitcoin addresses, or you won’t be able to restore your funds.
Any device that can be accessed via the internet isn’t safe from theft and hacking.
Aside from actually backing up all of your wallets, encrypt a password on backups as well.
Don’t just store backups in one place, either. If you only use one USB that you end up losing, you’ve also lost all of your coins.
Use a combination of the options we’ve already discussed, like USBs, paper wallets, and cold storage devices. Then, put them in secure vaults that are fireproof and waterproof.
And always update your backups when you get new coins.
Cryptocurrency transactions are irreversible. That’s why you need to be very careful when buying or selling coins.
When sending coins on an exchange, you need to double check that you’ve entered the correct wallet address.
Otherwise, you won’t be able to recover lost coins.
Understand how cryptocurrency transactions work before you begin buying and selling. That way, you can protect your safety and security.
Certain cryptocurrencies have recommended safety precautions or requirements that you must meet before you can buy or sell.
For example, always use a new address when you send coins with IOTA, or your security is weakened.
When it comes to Ripple, there is usually two parts to the address: the wallet address and the destination tag.
If a proper destination tag isn’t included in the transaction, your coins can end up in the wrong account or become lost.
Another reason to pay attention to the address that you’re sending coins to is that trojans can lurk on people’s computers.
When a victim copies an address to send out tokens, the trojan swaps the wallet address for its own alternate address in payment fields. Don’t copy, paste, and forget it.
Double check before hitting “send.”
As prices of cryptocurrencies rise, so do the security risks.
There’s no middleman when it comes to decentralized coins, which means you’re in charge of your own security.
There are countless ways that hackers can steal coins. Entire companies and exchanges have experienced breaches. There’s no such thing as being too safe.
From setup, you need to create strong passwords. Use different emails for every account you create and enable two-factor authentication.
Next, understand the importance of private keys. Your private key information is for you and you only. Otherwise, all of your coins can be taken.
You can generate private and public keys online or offline. Offline methods are the safest.
Only store your keys and coins on wallets that you feel safe using. Cold storage is the best and safest option.
Only keep a small amount of Bitcoin (or other cryptocurrency) in your wallet and always back it up.
Practice transaction safety by double checking addresses before hitting send.
What safety precautions do you take to protect your coins? Up your protection before it’s too late.